[petekoch]

A while back, I posed a question about Delta Financial (DFC) -- probably in the Value Trail thread. I asked if anyone knew of a reason to buy this issue, other than the fact that Pabrai had bought @20% of the company. The response was no, no easily determined reason. But because Mohnish was such a big buyer, I ventured in with a small (1000 share) speculative position at just under $5/shr. As the price dropped, I remember my thinking while reading A Mathematician Plays The Stock Market by Prof. John Allen Paulos. Paulos lost money with WorldCom, buying all the way down. After reading the book, I remember thinking that the reason he lost all his money was because he never considered what his risk was. That got me to thinking that I was in the same boat with DFC. I didn't really know the company's business nor did I understand the risk involved. I was just in because Pabrai made such a big play. So I sold for a loss at under $3.70/shr.

Today, Delta announced it was filing for bankruptcy and stated that it was probably no longer a going concern. Last I looked, the shares were trading for about 16 cents. I lost a few hundred dollars, but Pabrai owned over 4.6 Million shares. He bought some at $5/shr, but he also bought quite a bit at $10-15. Delta represented almost 6% of his portfolio.

So much for HEADS I WIN, TAILS I DON'T LOSE MUCH.

Fortunately, since I knew I hadn't done my due diligence, I limited my stake in DFC to a small position. I have moved into large, full positions in USG, CSE and USB. I might actually buy more USB -- I don't know of a sounder, more conservative big US bank. I'm also looking at the SNV/TSS spinoff, which is scheduled for the end of the month. I know the details of the spinoff. Does anyone have an opinion on this deal?