(FORTUNE Magazine) – What makes a company a Wall Street darling? It helps to have a scintillating story or to sell a product that people are gaga about, but above all what makes for a Wall Street darling is buzz. And right now no company is generating more buzz on Wall Street than Kmart. Yes Kmart, the sick man of discount retailing and the butt of 1,000 jokes.

That Wall Street is now sweet on Kmart is irrefutable. Since coming out of bankruptcy in June of last year, Kmart's stock has exploded, climbing from $15 and change to nearly $80. The rising level of chatter about the company has been commensurate. In early June, in a column in New York magazine, the irrepressible Jim Cramer tagged Kmart as the next Berkshire Hathaway! With skywriting like that, it's no wonder hot-money types, as well as short-sellers, have plunged into the stock.

I should stop here to make the very important point that Kmart is now 52.8% owned by its chairman, financial impresario Eddie Lampert, who heads ESL Investments, a $6 billion hedge fund. Eddie is an interesting character. A former protege of Bob Rubin in Goldman Sachs's risk arbitrage department, Lampert has built a strikingly successful hedge fund business--initially with Richard Rainwater down in Texas--often by buying stakes in down-and-out companies and then foisting change upon them. (Case in point: AutoZone.) Last year Lampert was kidnapped, bound, and blindfolded in a bathtub in a cheap hotel outside New Haven and held for ransom. (The ransom was never paid, and the kidnappers were caught after ordering pizza on Lampert's credit card.)

So is Lampert strictly interested in reviving Kmart as a discount merchandiser, and if the answer is yes, what is the company's strategy? Or is he more interested in selling off Kmart's valuable real estate portfolio? Or is Lampert looking to create some sort of holding company--which is the point that Cramer was making. Let's look at each scenario. First, reviving Kmart: Yes, the company still has Martha Stewart's line (is that an asset?). It's also true that Kmart reported net income of $93 million in the first quarter, but that included net gains on sales of assets (including corporate aircraft and a Trinadadian subsidiary) of $32 million. Same-store sales declined 12.9%, and you'd be hard-pressed to find anyone who's convinced by new CEO Julian Day's turnaround strategy. Plus, let's not forget that Kmart is facing off against formidable rivals in Target and, especially, Wal-Mart. Growing Kmart looks like a long shot.

So is Lampert interested in making Kmart a real estate play? Could be. In early June, Kmart sold 24 of its stores to Home Depot for $365 million. Then, less than a month later, Kmart sold another 54 stores, this time to Sears for $621 million. Now Kmart only owns 78 stores (though it still has leases on more than 1,300). Looks as if Lampert is running out of real estate. As for Lampert doing his best imitation of Warren Buffett and turning the Big Red K into a holding-company-cum-investment-vehicle, that may very well be. Of course it may also very well not be. Lampert has yet to invest in a Washington Post or buy a Geico. You get the picture.

So what is Lampert's endgame with Kmart? It's a good bet that even he doesn't know. One thing's for sure: Lampert will probably keep moving the pieces around as long as he makes money. (So far he has turned his reported $750 million investment in Kmart into some $3.5 billion.) Which raises the question: What happens to Wall Street darlings? Well, sometimes they go on to become Starbucks or Federal Express. But often they become Iomega or Theglobe.com. Notice the difference between the stars and the dogs. With the former, the company's business, its product, and its competitive position is clear. With the latter, it's all a lot less clear. Which category does Kmart belong in? Hard to argue it's in the first.

ANDY SERWER, editor at large of FORTUNE, can be reached at aserwer@fortunemail.com. Read him online in Street Life on fortune.com and watch him on CNN's American Morning and In the Money.