Dykstra: Delphi Financial Bodes Well

Today's pick is the sort of opportunity you want in a selloff.
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Before I give you my pick today, be aware, as the market is going to get hammered today! It's already been down over 200 points.

Outside of the financial sector, actual September-quarter earnings results have been roughly in line with expectations. But expectations for the December quarter continue to erode, reflecting downbeat guidance from several bellwether companies.

Richard Moroney, the editor of the

Dow Theory Forecasts

newsletter, which happens to be one of my favorite newsletters of the 30 I subscribe to, explains that the market faces some near-term headwinds:

The calendar. Since 1950, September has been the worst-performing month for the Dow Industrials, S&P 500, and Nasdaq Composite -- by a wide margin. For the S&P 500, the average monthly loss in September is 0.8%, with 23 gains and 33 losses. Only February and August also have average monthly losses, and September is the only month with more losses than gains. Earnings preseason. Earnings-estimate trends remain mostly favorable, though September-quarter profit warnings for S&P 500 companies are running slightly above historical norms. Estimate trends should be watched closely over the next month, as should the market's ability to weather the high-profile profit shortfalls announced every quarter. The bottom line: until humans learn to "bottle luck and sell it, in one of these get-rich-quick schemes"; the thinking will remain just that -- schemes.

When I invest my money, I look for quality companies that have been unfairly taken down because some bad-suited broker makes a negative comment or downgrades the stock, leading to the stock being oversold. In some cases, this happens because the company beat the number but did not guide up "high enough" for the broker's liking.

A perfect example:

my pick yesterday,

International Game Technology

(IGT) - Get Report

said quarterly earnings rose on improved results from its gaming operations.

The slot machine maker said fiscal fourth-quarter net income rose to $122.6 million, or 38 cents per share, from $114.9 million, or 33 cents per share, a year earlier. Let the operators take this apart, and after they beat it up to where it is down $2, I would strongly recommend buying the same deep-in-the-money (DITM) calls that I put my order in for on Wednesday.

Beating the market over time is a fine way to amass wealth. And eventually, those who build wealth can become rich. It takes longer, but the rewards are just as great, and the risks are far less.

The play today,

Delphi Financial Group

(DFG)

, is a past winner and defines consistency. Delphi continues to post impressive growth in group employee-benefit premiums, driven by strong gains in disability and life insurance.

Pricing discipline and tightening underwriting standards at its Reliance Standard Life subsidiary have led to improved profit margins. Management says the market for excess-workers'-compensation insurance remains strong, rates are holding steady, and retention is high.

Solid demand for voluntary products, including the company's new limited-benefit health insurance, has driven growth in new production. Delphi continues to penetrate its longtime favorite target, the small-business market, with disability insurance. In recent quarters, Delphi has also made headway in the highly competitive market for large businesses. The company should benefit from a healthy job market, particularly among smaller employers. For these reasons I will place a limit order at $4.90 to buy 10 April 35 calls (DFGDG).

Always remember: Life is a journey; enjoy the ride!

At the time of publication, Dykstra had no positions in stocks mentioned.

Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for TheStreet.com, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."