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It's an annual event that some of us look forward to with the same eager anticipation that we usually reserve for Santa Claus on Christmas Eve, the party on our birthday, or for us nerds, the first day of school.

The release of Warren E. Buffett's annual letter to Berkshire Hathaway shareholders means more than just a dry report with performance numbers. Count on the unassuming package to have some of the wittiest, most incisive, and yes, most sage, advice investors can read every year.

By now, you probably know that Buffett is one of the most successful value investors of all time. You might argue with his philosophy or views on specific issues, but you can't dispute his record. Since Buffett started running Berkshire Hathaway as an investment arm and holding company in 1965, the company's shares have produced an average annual gain of 22.5 percent, more than twice the average of the S&P 500 over the same period. Over those 38 years, Berkshire Hathaway's yearly performance has trailed the S&P only five times, although two of those came recently, in 1999 and 2003.

So what's the secret to his long-term success? Many think it's his ability to pick stocks. But in reading his shareholder letter released last weekend, it's apparent that he's also the master of diversification - so much that comparisons to the S&P 500 become less appropriate every year for Berkshire Hathaway.

Consider the pre-tax gains reported for the company's investment assets in 2003:

Common stocks	$448 million
U.S. bonds	$1.485 billion
Junk bonds	$1.138 billion
Foreign exchange contracts	$825 million
Other	$233 million

In 2002 Berkshire Hathaway entered the foreign currency market for the first time, and 2003 saw that position enlarged, mostly as Buffett became bearish on the dollar. While he says he will continue to have the bulk of Berkshire Hathaway's net worth in U.S. assets, he is clearly worried about our trade deficit -- reported this week as a record $43.1 billion for the month of January -- and its impact on the dollar.

Buffett uses foreign exchange contracts to partially offset the risks to the billions of dollar denominated cash equivalents held in the portfolio. When he can't find anything exciting in which to invest, he defaults to U.S. treasuries, including T-bills and repurchase agreements. The return is low, but he refuses to reach for more income by lowering credit standards or extending maturities. He will not assume that risk.

When Buffett does buy stocks, it's for companies that he believes have a sustainable competitive advantage. He buys stocks at prices well below what he calculates to be its fair value. That way, if he's wrong, he can still sell the stock at a price that is above what he paid. He also invests only when the odds of being right are more than 50 percent. He also doesn't buy stocks that are cheap just for cheap sakes -- some stocks are cheap because the company is on its last legs. Although he recently purchased the stock and debt of bankrupt companies such as Burlington Industries, that is usually the exception and not the rule.

He is also a buy and hold investor, rarely changing positions of his major holdings. He admitted to buying some Wells Fargo shares in 2003, but there was little, if any, activity in the six largest common stock investments: American Express, Coca-Cola, Gillette, H&R Block, HCA Inc., and M&T Bank.

Buffett also has the patience of Job and unshakeable faith in his team and his selections, so he's willing to wait and wait and wait until his picks pan out - his investment in Coca-Cola, for instance, took a decade to turn a profit. His discipline, more than any other trait, sets him apart from all the Warren wanna-bes. To be able to keep your head when all about you are losing theirs (and blaming it on you) is a rare and enviable trait, one that few of us possess.

Sometimes he can be disciplined to a fault. Buffett now openly regrets not selling large amounts of Berkshire Hathaway's stock portfolio during the late '90s market bubble:

We are neither enthusiastic nor negative about the portfolio we hold. We own pieces of excellent businesses -- all of which had good gains in intrinsic value last year - but their current prices reflect their excellence. The unpleasant corollary to this conclusion is that I made a big mistake in not selling several of our larger holdings during The Great Bubble. If these stocks are fully priced now, you may wonder what I was thinking four years ago when their intrinsic value was lower and their prices far higher. So do I.

But Berkshire Hathaway these days largely is about buying businesses outright rather than trading assets or buying undervalued stocks. In 2003, the company bought two companies, prefab home builder Clayton Homes and McLane, a wholesale distributor of groceries and non-food items for groceries, pharmacies, quick stop stores and

Buffett describes the acquisition of Clayton as an unusual business journey, sparked by a college class that gave him a copy of the autobiography of Jim Clayton, who founded the housing company that bears his name. Yet the company itself has characteristics of a classic Buffett acquisition: A strong competitor in its industry, with solid financials and, perhaps most important, management that Buffett trusts.

The Sage of Omaha says he bought Clayton based entirely on Jim Clayton's book, the company's public financial statements and getting to know Clayton's current CEO, Jim's son. McLane was acquired from Wal-Mart with even less research -- no due diligence at all, according to Buffett, who says he bought McLane after one two-hour meeting with Wal-Mart CFO Tom Schoewe. McLane didn't fit in with Wal-Mart's business, and Buffett himself says little about it, other than to praise its CEO as "superb" and note that the business was "made to order" for Berkshire Hathaway.

The company's annual meetings in recent decades have become sessions for the masses to drink in adulation for their investing hero. Some writers have likened it to a rock concert, and Buffett himself calls it a Woodstock for Capitalists. If nothing else, it's a big boost for Omaha commerce; this year's meeting, scheduled for May 1, includes shareholder-only trips to the local locations of companies that are Berkshire Hathaway investments or holdings, including the usual visits to Borsheim's jewelry, Nebraska Furniture Mart, and exhibits of other Berkshire goods and services such as a 1,600-square-foot Clayton home, auto insurance quotes from GEICO and aircraft from NetJets, Berkshire Hathaway's fractional-ownership operation, and the dominant player in that corporate jet niche.

For the rest of us on the outside looking in, tune into Wall $treet Week with FORTUNE on March 12, when we talk with Jean Marie Eveillard, the master international value investor, and Edwin Walczak, a self-proclaimed Buffett-ologist.