Business Blog: Hoover’s Business Insight Zone

The Company of the Day is Bear Stearns.

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Should we be bearish or bullish on Bear Stearns? That has been a hotly debated question in financial circles since earlier this summer, when the venerable investment bank took a loss of billions on two of its hedge funds that were tied heavily to subprime mortgages. The chatter picked up again during the past few weeks, when the company reported bad quarterly earnings figures, and prognosticators began projecting various buyout scenarios that featured white knights — that is, strategic minority investors — of various financial stature, up to and including Warren Buffett himself. And no wonder, since the company’s problems have turned its shares into a bargain: even after a rebound in recent days, Bear’s stock has lost nearly a quarter of its value during 2007.

The likelier course for Bear Stearns is that it will keep blazing its own trail. Although billionaire British financier Joseph Lewis has built up a 7% holding in the company, it doesn’t look like he has any plans to change the way it operates; in other words, he may simply be buying Bear while it’s cheap. Beyond that, the company itself has denied rumors that it is holding talks with any potential strategic investors, be they Citic or Bank of America or Mr. Buffett.

And then there’s the deeper issue of culture. Bear’s CEO, James Cayne, lacks for nothing when it comes either to analytical acumen (he has won more than a dozen national championships in contract bridge) or self-confidence. The traders who work under him tend to relish the rough and tumble of the markets, and Bear is hardly a place for much hand-holding. So despite its troubles this year, and regardless of how much fun it is to speculate on Buffett or someone else making a meal of Bear stew, odds are that this Bear will rumbling along — and roaring again — for a long time to come.

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