"Buy on the rumor," as the saying goes, has been taken to heart by Bear Stearns investors. Yet, the brokerage house bay prove elusive for iconic investor Warren Buffett.

Bear Stearns has reportedly looked for a cash infusion since fallout from rising mortgage defaults rippled through the financial markets. The brokerage has been hurt by increased costs of funding and pressure on its mortgage business. (See: "Bear Soars On Buffett Rumors")

On Wednesday, the New York Times reported that Buffett, Bank of America , Wachovia , and a couple other investors were in talks to buy up to 20% of the brokerage. Buffett, chief executive officer of Berkshire Hathaway , is the world's second richest person with a fortune of $52.0 billion.

"Bear has weathered a lot of rough stuff here," said Peter Dunay, an investment strategist with New York-based Leeb Capital Management, told the Associated Press. "If you consider how far it has been beaten down, and that the worst might be behind them, then it makes a lot of sense for the smart investors who can afford to play aggressively."

Shares of Bear Stearns closed 7.7% higher on Wednesday. On Thursday, they rose further in afternoon trading, before falling to close down 1.6%, or $2.00, to end the day at $121.00.

But selling such a stake would be an uncharacteristic move for Bear Stearns Chief Executive James Cayne James Cayne . He has been unwilling to sell any part of the company for less than three times book value, says Sanford Bernstein analyst Brad Hintz. Bear Stearns shares are trading at a steep discount right now after losing 24.4% of their value in 2007. (See: "Buffett Buy Would Be Out Of Character For Bear")

Another billionaire already took a large stake in Bear Stearns earlier this month. Joseph Lewis bought a 7.0% stake in the brokerage for $860.4 million over two months. Lewis is the world's 369th wealthiest person with a fortune of $2.5 billion. The Bahamas resident began his climb to riches with his family's catering business and moved into currency trading in the 1970s. (See: "Billionaire Rushes Into Bear Stearns")