They more than compensate for any mistakes he made in timing the U.S. dollar’s weakness the year before or more recently in taking some mark-to-market losses in credit default swaps, where he eventually should end up making very good money.

More recently, Buffett’s Berkshire has added – either directly or indirectly – holdings in such companies as Kraft Foods Inc. (NYSE:KFT), making it the foodmaker’s biggest shareholder, and GlaxoSmithKline PLC (NYSE ADR: GSK), Europe’s largest drugmaker. Berkshire also was involved in a buyout deal for chewing gum icon Wm. Wrigley Jr. Company (NYSE:WWY).

And we’ll be filing periodic updates on some of his other, more-recent moves.

The bottom line: Under Buffett, Berkshire Hathaway is a like an astute and disciplined kid in a candy store.

It’s very clear that Buffett’s investment philosophy – capitalizing on value situations in companies that enjoy strong, sustainable competitive advantages in secular growth markets, and that will perform very well over the long term – has worked much more often than not. And most of the “mistakes” that some analysts point to are actually linked overwhelmingly to short-term market movements that could easily reverse.

For instance, let’s take a look at Berkshire’s second-quarter earnings and the performance in its “troubled” insurance businesses.

For the second quarter, Berkshire’s net income declined 8% to $2.88 billion. Operating earnings declined 10% to $2.27 billion. The per-share operating earnings of $1,465 on the Class A shares actually topped Wall Street’s estimate of $1,370.

Berkshire typically derives about half of its revenue and profits from its insurance businesses. Its underwriting profit came in at $360 million, a drop of about 43%, and Berkshire said it anticipates that price competition in most of its insurance markets will reduce underwriting profits for the rest of the year.

However, Berkshire was able to post an increase in its insurance investment income to $884 million, up 3% from the $862 million reported in the year-ago quarter. That’s something that rival American International Group (NYSE:AIG) was unable to accomplish.

Berkshire Hathaway’s operating profit from its non-insurance businesses advanced 4%, reaching $1.086 billion.

Some observers contend that Buffett has become too distracted with too much ukulele-playing at Berkshire Hathaway’s investor gatherings and catching the public eye with trips to China, shown live on financial cable channel CNBC. Buffet is now also intent on saving the United States from “itself” and the mountain of debt it has amassed, which is the reason for his participation (and stellar performance) in the financial documentary “I.O.U.S.A..”

And yet some argue that Buffett’s advancing age (77) brings the uncertainties of succession to the forefront and that Berkshire Hathaway, with a huge pile of cash and its massive size, is too big to find enough profitable opportunities. Think again.

The evidence is very clear that when it comes to selecting the right companies for the long haul – the process developed by Buffett and his longtime partner in managing Berkshire, Charles T. Munger (84) – is solidly in place, until proven different, rather than the opposite. And while succession is a valid question, the list of capable individuals to carry on with this process inside this organization is long. And the Berkshire portfolio is very sound.

In terms of the decline in Berkshire’s share price, most of it can be attributed to the general slowdown of the U.S. economy and the need for many investors to take their (huge) long-term profits in this stock (which means staying out of it for at least 30 days before reloading, as part of the so-called “Wash Sales Rules.”).

While such key Berkshire holdings as American Express Co. (NYSE:AXP), Wells Fargo & Co. (NYSE: WFC) and its insurance units are temporarily suffering in different degrees from the real estate crisis and global credit downturns, these conditions will eventually abate and reverse strongly. And since stock prices have, in many cases, been pushed down much more than was warranted, this reversal could be very strong, indeed.

This is a high-quality investment portfolio. Once it contained the very best companies in the U.S. market – such flagship brand names as The Coca-Cola Co. (NYSE:KO).

But Buffett has changed with the times, recognizing the powerful opportunities that globalization has brought – and will continue to bring for decades to come. In addition to the afore-mentioned move into Korea, Berkshire is engineering forays into such promising – but undervalued – markets as Germany.

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