Walter Energy Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of coal producer Walter Energy (NYS: WLT) were burning hot today, gaining as much as 30% in intraday trading on the strength of buyout rumors.

So what:The Times of London unleashed rumors today that Anglo American may be preparing to bid as much as $120 per share for Walter. The Times also suggested that BHP Billiton (NYS: BHP) may also be mulling an offer for the company. After a very disappointing stretch for the stock, investors would get a significant boost from the rumored offer.

Now what: Buyout rumors can be very exciting for shareholders. Walter's stock closed at $75 yesterday, so a $120-per-share buyout offer would represent a massive 60% premium. However, buyout rumors sometimes prove to be nothing more than that -- rumors. For that reason, investors chasing the stock's big gains today may want to be careful, because if an actual offer never materializes, traders with a "what have you done for me lately" mentality will eventually lose patience and the stock will tumble all over again.

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