American Express (AXP), one of the world's top credit card companies, has also long been a favorite of Berkshire Hathaway (BRK-A, BRK-B) CEO Warren Buffett.
"You can't create another American Express," Buffett told Bloomberg in December. "I could create another shoe store. I could create another business publication. I could do all kinds of things with hundreds of billions of dollars. But I can't put in the minds of people what is in their minds about American Express."
As of September 29, 2022, Berkshire held 151,610,700 AmEx shares, or 20.29% of the total. At the end of 2021, AmEx was Berkshire's largest securities holding by weight and third-largest holding by market cap, with its stake valued at $24.8 billion — which grew to $26.1 billion by September 29, 2022.
In 2022, Berkshire built a stake of at least 20.2% of Occidental Petrleum (OXY) and obtained regulatory approval to buy up to 50% of the oil giant's common stock. So while AmEx may no longer be Berkshire's largest holding by weight, the company's value to Berkshire is clear.
“It's sort of like a Good Housekeeping seal of approval," American Express CEO Stephen Squeri told Yahoo Finance recently. "Warren and Berkshire are iconic investors, and to have him speak about the brand and speak about the company, and to speak about the direction that we're going so enthusiastically [is important]."
In 2020, when the pandemic hit, AmEx stock declined to as low as $66 as lockdowns and travel bans dragged down profits by 39%. But Buffett retained his stake in the company, even as he sold airline and bank stocks.
AmEx was able to rebound after enduring the COVID-induced economic downturn and reached its highest price in decades at $196 a share in 2022.
That momentum has carried over into 2023: AmEx's latest quarterly results showed a slight miss for its fourth quarter, but the company indicated it remains positive on its outlook for the remainder of the year.
Although AmEx's brand emerged from the pandemic in a position of strength, that hasn't always been the case.
Buffett's interest in AmEx began in the 1960s, during the first wave of consumer credit via banks. For American Express, it wasn't without a bit of controversy.
In 1963, Anthony De Angelis, the founder of Allied Crude Vegetable Oil Company, used his company's inventory as collateral for loans from more than 50 companies, including AmEx. De Angelis used these loans to drive up prices in the soybean oil market and increase the value of Allied.
Eventually, a whistleblower came forward claiming that Allied was misleading AmEx to get more loans by filling up oil tanks with water. This was proven to be true and De Angelis filed for bankruptcy and went to prison for seven years. The impropriety became known as the "salad-oil scandal" and mounted concerns on Wall Street as AmEx now had to pay Allied's bill.
"Every trust department in the United States panicked," Buffett said about the scandal. "I remember the Continental Bank held over 5% of the company and all of a sudden not only do they see that the trust accounts were going to have stock worth zero, but it could get assessed. The stock just poured out, of course, and the market got slightly inefficient for a short period of time."
Buffett used the opportunity to acquire 5% of AmEx for roughly $20 million.
The credit card boom of the '70s and '80s made AmEx a top player in the market. By the late '90s, two-thirds of American households had a credit card. Buffett could now go all out and make his first large stake in the company in 1991 with $300 million.
Within seven years, Buffett owned more than 50 million shares of the company. Berkshire Hathaway hasn't purchased any American Express stock since the late 1990s, but its stake in AmEx has continued to increase as a result of stock buybacks.
Between 1998 and 2005, Berkshire's stake climbed from 11.2% to 12%. In 2020, AXP became Berkshire's largest holding by percentage.
And even though AmEx had a rough start to 2016 financially, Buffett stood by his investment.
“Now we own 20% of American Express,” Buffett said at the 2022 Annual Berkshire Hathaway Shareholders Meeting. “That happens to have worked out extremely well. If they overpaid for the stock and all that — it doesn’t solve every problem — but it’s a wonderful thing if you’ve got an asset you like and they take your ownership interest up.”
One of American Express's greatest assets has been its perception as a status symbol, which has endured after undergoing a series of rebranding efforts.
The company has a simple revenue model: Most of its revenue is generated from interest from balances and fees from cardholders and from merchants. Merchants are charged more than AmEx competitors such as Visa (V) or Mastercard (MA) because AmEx cardholders tend to be wealthier and spend more, which benefits merchants down the line.
AmEx also collects revenue from the data it gathers on cardholder spending, which is used to target marketing and provide offers to customers. That has, in turn, helped AmEx capture the interest of millennial and Gen Z consumers in recent years as the company has evolved from being a traditional luxury credit card provider to a digital payment provider.
AmEx rebranded its Platinum card as a "lifestyle card" by increasing its fees and at-home perks and dove into e-commerce and food delivery services with by increasing rewards. Since the strategic changes went into effect, the company doubled its number of Platinum cardholders, with millennials and Gen Z customers making up roughly 60% of all new consumer cardholder growth.
And as pandemic restrictions were lifted, AmEx grew its global reach with new travel benefits. They offered more rewards, points, and a new Centurion airport luxury lounge. AmEx's payment method is now accepted on most websites in over 178 countries, according to Statista.
“This whole concept of generational relevance is huge for us," Squeri told Yahoo Finance. "We'll continue to modify our products and add value to our products that not only speaks to millennials but speaks to Gen Xers and speaks to Boomers. Millennials and Gen Zers are the fastest-growing segment that we have.”
The AmEx CEO also stressed that Buffett "gets it right" as AmEx's largest shareholder.
"He gets that the AmEx brand is special," he said. "He tells me that all the time. We both agree the customer base is special. Anybody that has Warren as their largest shareholder would be pretty happy."
—
Tanya is a data reporter at Yahoo Finance. Follow her on Twitter. @tanyakaushal00.
Click here for the latest trending stock tickers of the Yahoo Finance platform
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
Related Quotes
Shares of Carvana Co. continued their “meme”-like surge Tuesday, rallying 10.0% toward a 2 1/2-month high in premarket trading despite no official news released. The online used-car retailer’s stock had run up 53.9% over the past two days, and 55.5% amid a three-day win streak through Monday.
Considering his status, only a brave financial prognosticator would tell investors to ignore some advice from Warren Buffet. That, however, is what Bank of America's Savita Subramanian currently recommends investors should do. While the investing sage has often said that the best strategy for retail investors is to purchase and hold an index fund that keeps track of the S&P 500, Subramanian, who is the head of US equity and quantitative strategy at BofA, does not think that is the best way forwa
Electrify America will bring 1000 EV chargers to this gas station chain, in one of the biggest projects of its type in the US.
Among the best stocks to buy and watch, Warren Buffett-led Berkshire Hathaway is approaching a new buy point in the ongoing market rally.
The S&P 500 dipped by 19% in 2022, but stocks still don’t seem cheap to Charlie Munger, Warren Buffett’s billionaire partner at Berkshire Hathaway. “In my whole adult life, I have never hoarded cash, waiting for better conditions,” Munger said in an interview in late 2022. “I’ve just invested in the best thing I could find.” Yet he acknowledged that Berkshire Hathaway is sitting on billions of dollars in cash. The reason isn’t that Buffett and Munger think they can wait for stocks to get even ch
Business magnate Warren Buffett was once the richest person in the world and is widely considered one of the greatest investors out there. Buffett, who is often vocal about his strategies and investing philosophy, is the king of long-term investing. He has held The Coca-Cola Co. and American Express Co. for decades and has seen massive gains from those holdings. To stay updated with top startup investments, sign up for Benzinga’s Startup Investing & Equity Crowdfunding Newsletter Buffett has sai
Thursday is a big day for tech earnings as Alphabet, Amazon and Apple all are set to report their quarterly results.
Amazon has struggled to exceed bottom line estimates, falling short of the Zacks Consensus EPS Estimate in three consecutive quarters. Rebound quarter inbound?
The day after a successful share sale, the conglomerate of Asia's former richest man has decided to return investors their money.
When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far…
“Berkshire will always be building.” So said Warren Buffett in his latest annual letter to Berkshire Hathaway shareholders in February. Most people might imagine he means adding to Berkshire’s dozens of company holdings or the $144 billion in cash he calls a “financial fortress.” But he was actually referring to clean energy. Buffett has had exposure to clean energy since the early 2000s, and in last year’s letter, he called it one of the “four jewels” of Berkshire Hathaway. A 30-fold Increase F
As the Fed raises interest rates, here are the biggest winners and losers from its latest decision.
Yahoo Finance’s Daniel Howley joins the Live show to discuss quarterly earnings for AMD, the drop in PC sales and shipments, and the outlook for AMD.
It’s become mainstream to predict a recession this year. The Federal Reserve is on a steady path of interest rate increases – the latest was a 25-basis point hike announced today – to fight inflation, and the central bank has already indicated it will stay this course until inflation is well and truly down. By definition, that will involve increasing the cost of capital to choke off the money supply, and likely spark a recession in the bargain. But not everyone is jumping onto that train. Watchi
Last year was quite tough for equity investors: All the major U.S. stock indexes ended 2022 in the red. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite were down by 9%, 19%, and 33%, respectively. The first distinctive growth stock that will help you build your long-term wealth is cybersecurity player CrowdStrike (NASDAQ: CRWD).
With Apple leading the pack and other tech firms following, these are the 10 most profitable companies in the world by 12-month trailing net income.
Speculative stocks rallied Wednesday as traders ramped up [dovish rate bets](https://www.wsj.com/livecoverage/federal-reserve-meeting-interest-rate-hike-february-2023/card/rate-bets-turn-dovish-as-powell-speaks-zPT33NiWlqdHaw9a40Kx). Carvana shares rallied 39% in late Wednesday trading, bringing the online used-car seller's year-to-date gains to nearly 200%. Peloton shares rose 26%. Both stocks are pandemic-era favorites that crashed hard in 2022. Fed Chair Jerome Powell said Wednesday that the
Looking ahead, Enterprise Products has over $3 billion in assets under construction that are slated to enter operations this year.
Michael Burry, the hedge-fund manager at Scion Asset Management who correctly forecast the 2008 financial crisis, on Tuesday night sent out a one-word tweet: “Sell.” Burry didn’t elaborate, but it’s not hard to fill in the blanks. Assets like bitcoin and ARK Innovation ETF surged in January, in a seeming dash for trash on the view the Fed’s going to pivot to rate cuts soon, which is a lot to stomach for a value-focused investor like Burry.
India's Gautam Adani, the school dropout who rose to become one of the world's richest men, suffered a stunning defeat on Wednesday when his flagship firm withdrew a blockbuster share sale after an attack by a small U.S. investment firm over his business practices. The move came after Adani's companies lost nearly $86 billion in the stock market as investors bailed out on the tycoon who built a conglomerate spanning ports, coal mines, food businesses, airports and lately media. On Tuesday, the Adani group appeared to have fought back the attack by the New York-based short-seller Hindenburg and rallied investors behind the $2.5 billion share issue of flagship firm Adani Enterprises.
source
