Sept. 28 (Bloomberg) -- Speculation that Warren Buffett would come to the aid of Bear Stearns Cos., the fifth-largest U.S. securities firm, may be a signal to sell its shares.

Bear Stearns is the seventh company named as a potential target for an investment or acquisition by Buffett's Berkshire Hathaway Inc. this year, Bloomberg News reports show. There's no evidence so far that the billionaire investor followed through on any of the others, and the reticence allowed him to avoid losses.

Five of the companies -- USG Corp., New York Times Co., Zurich Financial Services AG, Hovnanian Enterprises Inc. and Countrywide Financial Corp., in that order -- trade at lower prices now than they were when the speculation surfaced.

The declines range from 7.2 percent for Zurich Financial, Switzerland's largest insurer, to 41 percent for Hovnanian, a U.S. homebuilder that posted losses in the last four quarters.

Kraft Foods Inc., which the Wall Street Journal named in a July 26 story, is the exception. That said, the 2.9 percent gain in the Northfield, Illinois-based company's shares fell short of a 3.2 percent advance in the Standard & Poor's 500 Index.

Bear Stearns isn't quite the same as the others because Buffett's name isn't the only one linked to the firm, based in New York. Bank of America Corp. and Wachovia Corp. are potential investors, along with China Construction Bank Corp. and China's Citic Group, according to the New York Times. Citic was also mentioned in an Aug. 9 story in Forbes magazine.

Erasing More Gains?

Bear Stearns's shares gained 7.7 percent two days ago as the list of possible suitors grew to include Buffett. On Aug. 16, the day of the initial flurry, the price rose 13 percent.

The stock fell 1.5 percent yesterday after CNBC reported that the firm wasn't in talks with anyone, including Buffett. If the precedent set by his other supposed targets this year is any guide, the remaining gains may not last either.

USG, the largest U.S. producer of gypsum wallboard, has dropped 35 percent since Jan. 24. On that day, speculation that Berkshire was increasing its stake in the Chicago-based company or planning a takeover sent USG's shares higher.

New York Times has fallen 26 percent since Feb. 7, a day that Berkshire was supposedly buying shares of newspapers. In Berkshire's annual letter to shareholders, published March 2, Buffett wrote that papers' business is ``definitely eroding.''

Zurich Financial had its turn on May 10, when the stock reached its highest price since 2002. While the drop since then is the group's smallest, it's almost three times as steep as the 2.5 percent decline in Europe's Dow Jones Stoxx 600 Index.

Overtaken by Events

Hovnanian, based in Red Bank, New Jersey, followed on July 13. The stock's 12 percent gain that day was lost within a week as falling house prices and a credit crunch hurt homebuilders.

Countrywide, the largest U.S. mortgage lender, was last month's supposed target. Buffett was cited as a potential buyer on Aug. 21, a day before the Calabasas, California-based company raised $2 billion from Bank of America. The stock's post-Aug. 21 loss amounts to 13 percent.

As the fourth quarter unfolds, Bear Stearns shares may be fated to fall.

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Exchange-traded funds are supposed to be an investment, according to the firms that create and sell them. The State Street Global Advisors fund that tracks a Standard & Poor's index of U.S. homebuilders is anything but.

The fund, called the SPDR S&P Homebuilders ETF, only had about $40 million of assets as of Sept. 25, according to State Street's Web site.

Yet the fund has been among the 10 most active industry- specific ETFs during the past three months, according to data compiled by Bloomberg. On an average day, 5.2 million shares changed hands. It's quite a number, considering there were a mere 1.85 million shares outstanding three days ago.

Every other fund in the top 10 is valued in the hundreds of millions of dollars, if not billions. The biggest reason why the homebuilder fund is so small may be that the industry has fallen on hard times. The ETF's benchmark, the S&P Homebuilders Select Industry Index, has tumbled 42 percent this year.

* * *

Starbucks Corp.'s shares are headed for their worst full- year performance ever unless they rebound in the fourth quarter. Judging by what Banc of America Securities LLC's Andrew Barish wrote in a report yesterday, a recovery isn't likely.

Barish, an analyst based in San Francisco, broke ranks with his peers by putting a ``sell'' recommendation on Starbucks, the world's largest chain of coffee shops.

``The stock and valuation may be under pressure'' as sales and profit growth falter, the report said. Barish sees Starbucks falling to $23 a share, or 15 percent below yesterday's close of $26.97, within 12 months. The shares trade at 32 times earnings.

Fifteen analysts have ``buy'' ratings or the equivalent on the company, according to data compiled by Bloomberg. Five more have ``hold'' recommendations.

Starbucks, based in Seattle, has retreated 24 percent this year. The stock has dropped only three times in 14 full calendar years of trading since the company went public in June 1992. The biggest loss, 13.9 percent, was recorded in 2001.

To contact the writer of this column: David Wilson in New York at dwilson@bloomberg.net

Last Updated: September 28, 2007 00:13 EDT