It’s usually what you might expect from an investment boob. That’s someone who buys a big chunk of stock, sells some of it after it tumbles, but then foolishly decides to retain a fairsized stake even though the fundamentals are crummy, the dividend is scrapped, and the company is regarded in some quarters as a potential bankruptcy candidate. In the process, the stock not unexpectedly keeps falling in a rising market.

To be enthusiastic about such a stock, it’s reasonable to suspect that the buyer has to be some rank amateur who resides on cloud 13 and doesn’t really understand the inner workings of investing in the market.

Wrong! In this case, the investor is the 76-year-old Oracle of Omaha. It all dates back to 2004, when Warren Buffett’s Berkshire Hathaway eagerly snapped up 9%, or nearly 8 million shares, of Pier 1 Imports, the sprawling furniture and home furnishings chain, in the high teens.

Thank goodness, Berkshire — which has taken a beating on the stock (now $7.31) — subsequently reduced its stake to around 3 million shares. As of now, Berkshire is believed to still hold a sizable number of shares, but how many is unclear since the company won’t talk about its investment positions.

Judging what I hear from a close tracker of the company, Morningstar, the Chicago-based investment advisor and mutual fund industry tracker, the Oracle and his fellow Pier 1 shareholders could be in for a lot more financial anguish because, as analyst Anthony Chukumba sees it, the company faces “possible bankruptcy and you could see a zero stock.”

In some harsh words, the analyst describes Pier 1’s merchandising as bad and its marketing as a disaster. There’s also too much wicker furniture, he says. Another of his major concerns: Big discounters like Target are going after the chain’s market at lower prices.

The company’s dilemma, according to Mr. Chukumba, runs deeper than just a weak furnishings market. “After struggling mightily the last two years, Pier 1 badly needs a new management team to give it a breath of fresh air,” he says.

In fiscal 2006, which ended last February, Pier 1 lost $40 million on sales of $1.77 billion. In the current fiscal year, the analyst sees the chain — about 1,260 stores — sustaining an operating loss of more than double that amount, about $90 million on roughly a 6% sales decline.”As scary as it sounds, I may be overly optimistic,” he says. Why so? “Because I don’t have them making money for the next three years,” he tells me.

The danger of owning shares in Pier 1 was underscored earlier this week when the company announced elimination of its 40 cents a share annual dividend, equivalent to a payout of $35 million. In response, the stock was hit with brisk selling pressure, immediately diving nearly 10% before staging some recovery.

In a recent memo prior to the announcement of the suspension of the payout, Morningstar equities strategist Josh Peters alertly warned subscribers of Pier 1’s deteriorating income prospects, observing that the company’s dividend represented an unsustainable draw on limited financial resources.

Pier 1’s financial results, he noted, were worsening faster than he expected; likewise, he wrote, there was no turnaround currently in sight. Like his colleague, Mr. Peters also took pot shots at the top brass, observing that management has no one else to blame for overaggressive expansion, poor merchandising, and ineffective marketing. He also took issue with the company’s decision to stock more upscale merchandise, a strategy that he felt had little chance of succeeding. As such, he thought the company would continue to struggle with a declining top line and that cash flow would remain negative.

Morningstar is by no means alone in its bleak assessment of the company. Indicative of this, Pier 1 — despite its skidding stock — sports a hefty short position of more than 11.5 million shares, which is in excess of 10% of the outstanding stock.

What’s Pier 1’s reaction to Morningstar’s scathing appraisal? Alas, no reaction. Repeated efforts to obtain comment from chairman and CEO Marvin Girouard were unsuccessful.

Interestingly, I spoke to two managers of Pier 1 stores. Asked about Morningstar’s comments, both generally concurred with its assessment of the operations, especially the need for change at the top management level.

In any event, the message from Morningstar is unmistakable: The Oracle should be docking at another pier, and probably the sooner the better.

dandordan@aol.com