Crossing investment swords with market guru Warren Buffett is like dueling with Alexander Dumas’s Three Musketeers. It’s practically a no-win.

Nonetheless, the stock folks at Chicago-based mutual fund tracker Morningstar are battling the Omaha billionaire, notably as it relates to his stake in PetroChina, China’s biggest energy company and a popular stock holding in the U.S.

Practically every investor wants to capitalize on China’s sizzling economic growth, which has run in excess of 7% a year the past five years. That includes Mr. Buffett, who took a $488 million stake in PetroChina last year. When word got out of his position, many investors jumped in, driving the shares from $23 to a 52-week high of $63.70. Friday’s close: $51.36.

So what now? Assuming Mr. Buffett still owns the stock – a spokesperson said he never comments on his investments – or if you do, it’s time to sell, judging from Morningstar’s latest advice to its clients. In brief, it views the stock as way overpriced and risky.

“I wouldn’t buy the stock unless it sold at about half its current price, or less,” observes equities strategist Mark Sellers. He notes that PetroChina, 90% government owned, is a play on the Chinese economy – nothing more, nothing less – and he points out if and when the Chinese economy sputters, the stock will crater. He further notes that the company can’t compete on production costs with other major oil companies because it is an inefficient state-protected monopoly.

“If it was ever forced to compete against international rivals, it would become toast,” he feels.

Morningstar analyst Michael Weber describes PetroChina, whose 2003 sales were $36.6 billion, as “a bloated behemoth” kept alive by price controls and a growing Chinese economy. Take away either one of those, and you’re not left with much, he said.

The analyst figures Mr. Buffett bought PetroChina (which sold as low as $19.10 last year), because it was dirt-cheap at the time, not because it is a wonderful business or because the Chinese government is a great business partner. For anyone who might be tempted to buy the stock, Mr. Weber’s advice: “I’d wait for China to hit an economic speed bump and buy the shares at a much cheaper price.”

Mr. Weber sees PetroChina rife with some sizable risks, not the least of which is the Chinese government, which has its fingers in just about every phase of the company’s business. The heavy regulation of the company is the first reason why it is a poor choice for being a long-term shareholder, he said. He went on to observe that although price controls keep PetroChina profitable, they also make it difficult for investors to determine the efficiency of its businesses.

“I’m confident,” he went on, “that guaranteed profits haven’t encouraged the firm to make its operations lean and mean. Monopolies never are.”

Mr. Weber goes on to note that China’s growing reliance on foreign oil will likely put a strain on the tariffs and import restrictions that protect PetroChina’s market. The company, he adds, simply will not be able to compete with foreign rivals once they’re granted access to the country. He notes, for example, that PetroChina has four times the number of employees as ExxonMobil but generates only one-third of Exxon’s operating profits.

Another reason the analyst thinks PetroChina is a poor investment is its entire dependence on China’s economy, which, though growing quickly, is overdue for a cyclical slowdown, he believes. Further, given the government’s 90% stock ownership and mandating much of the firm’s capital spending, Mr. Weber doubts PetroChina will be able to mitigate the impact of an economic downturn with cuts in personnel and investments.

Yet another negative cited by the analyst: China’s economic expansion has sapped Petrochina’s reserves, which have been declining for years. This means the company will have to make significant investments to boost domestic production. Likewise, it will have to look abroad for much of its new reserves, which requires evaluating the quality and potential of new reserves, as well as price, a skill the firm hasn’t needed in the past.

One short seller (a bettor that stock prices will fall, not rise) thinks Mr. Buffett’s run in PetroChina is just about over and sees its shares skidding to the low $30s over the next six months as investors awaken both to signs of a slowing Chinese economy and the company’s shortcomings.

If indeed the stock did fall to the low $30s, Morningstar would still view it as way overvalued since its official stance is that investors should only consider buying PetroChina at $24 or under.

In the case of PetroChina, Morningstar’s message seems unmistakable: It’s time, Mr. Buffett, to say goodbye because you’re on a slow boat to China.