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On Friday the 13th, May 2011, to be exact, we recommended entering Delphi Financial Group Inc. (DFG) at $29.53 to the theme of Ghost Busters and “not afraid of no earnings.” Our thesis for entering the position was based on an expected earnings growth rate of 10.3% over the next 5 years and quite honestly, for most of 2011, DFG hadn’t held up their end of the bargain. Analysts estimated $.91 for the June quarter and DFG delivered only $.86. I am not sure if it was “the pride in (us) that wouldn’t let go”. The estimate for the September quarter was $.85 while DFG disappointed again with only $0.79. Personally, I was beginning to feel it was more a case of “the fool who won’t let it show” as the stock languished in the low $20’s.

On December 21, 2011, “the heavens opened up and the walls [came] tumbling down” in a deal struck with Japan’s 2nd largest insurer Tokio Marine to acquire DFG for $2.7 billion in cash. Delphi Financial Group is trading today at $44.18, and the transaction is expected to close in the 2nd quarter of 2012 with an extra special dividend to shareholders of $1. My recommendation is to “take the money and run” and leave the few extra percentage points for someone else. Several shareholder rights law firms have already announced investigations into the manner in which DFG sought to maximize shareholder value in this transaction. These investigations signal to me “there (selling) is the only place to go” and still “fear the worst is yet to come.”

For my 2 cents, taking a 49.54% gain on DFG since May 13th (even a Friday the 13th) is like an early Christmas present, and so I’m happy recommending to “Take the Money and Run.”

Recommendation:

Sell DFG at the market, Tuesday, December 27, 2011

Ask yourself a question now there’s a multiple choice
‘you’ve only one shot, get it right’, says a distance voice
Don’t get your head into a spin
If only you could see the mess you’re in
The enemy is closing in see the white of his eye
He’s taking in his prey in sight it’s just a matter of time
May the games begin the best man win
If only you could see the mess you’re in

Is it the pride in you that won’t let go
Is it the fool that won’t let it show

Free yourself
If only you could see yourself
If you could see yourself

And when the heavens opened up and the walls come tumbling down
You know there is the only place to go
And when you’ve had enough of fighting
And every mean trick under the sun
But still you fear the worst is yet to come
Take the money and run

Allan Parsons Project



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Delphi Financial Group: Take The Money And Run