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Walter Energy's big day

|Includes:Walter Energy, Inc. (WLT)

Shares of Walter Energy (NYSE:WLT) are up 25% today on a takeover rumor. This is great news for investors who held these shares as they dropped from $130 to just $70 during the past 2 months. Anyone lucky to get into this stock in the low to mid $70s must be jumping for joy today. 

The stock's nearly 50% drop seemed a bit harsh to me but I didn't get in. Walter's business just doesn't click for me in this economy. According to Yahoo! Finance's estimates (see link below), the company is projected to see 88% and 21% growth in revenues for 2011 and 2012, but just a 40% and 19% growth in EPS over those two years. A couple of the company's financial ratios seem to be weakening as well.

Today's jump will help some investors recoup losses, but this isn't a time to jump right in. The stock traded above $97 earlier in the day, and we've already lost nearly $5 from the highs. I wouldn't be surprised to see this stock close near $90 today, and we could easily see $85 in the coming days.

While I won't rule out a takeover, I'm not interested in WLT at these levels. Let's see how the global economy is in a few months, and maybe I'll take another look then. I'd rather lose the upside on any takeover than see the losses if this stock drops back towards its 52-week lows.

Disclaimer: I have no position in WLT currently, and do not intend to initiate a position in the next 72 hours.




Link for earnings estimates: finance.yahoo.com/q/ae?s=WLT+Analyst+Est...

Stocks: WLT