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Why Lufkin Shares Skyrocketed

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 Lufkin Industries (UNKNOWN: LUFK.DL  ) soared 38% today after industrial behemoth General Electric (NYSE: GE  ) agreed to acquire the oil-field pump maker for $3.1 billion.

So what: The all-cash deal values Lufkin at $88.50 per share and represents a premium of about 38% to its closing price on Friday. GE is making the move to capitalize on the booming business of extracting oil and natural gas from shale rock, giving the shares of Lufkin peers like Weatherford International and Dover a small bump today as well.

Now what: The transaction, which was unanimously recommended by Lufkin's board of directors, is expected to close in the second half of 2013. "Lufkin's world-class people, equipment and services fit perfectly in our portfolio and will enable us to offer a wide range of artificial lift solutions to our customers in this fast-growing artificial lift sector," GE Oil & Gas CEO Daniel Heintzelman said. So while Lufkin is likely all popped out at this point, GE's rapidly increasing presence in the oil-field services business might be worth buying into.

For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE today. To get started, click here now.

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