6. American Express Company (NYSE:AXP)
Warren Buffett’s Q2 2024 Stake: $35.11 Billion
Year to Date Gain as of September 20: 42.72%
Number of Hedge Fund Investors In Q2 2024: 68
American Express Company (NYSE:AXP) is one of the best-performing Warren Buffett stocks in 2024 as it continues offering crucial financial services. Its integrated payment business, which includes credit cards, charge cards, and other financing products, has benefited from the robust US economy that has remained resilient amid the high interest rates.
American Express Company (NYSE:AXP) stands out as one of the top holdings in Buffett’s portfolio owing to its history of returning value through dividends. The robust core business has allowed the company to demonstrate consistent earnings power and fundamental strength, therefore growing its bottom line and dividends.
Its second-quarter revenue rose 8% yearly to record highs of $16.33 billion as profits landed at $3.02 billion or $4.15 a share. The impressive results stem from the company’s unique core business that generates earnings regardless of the economic conditions.
When there’s a slowdown in credit card spending due to tougher economic times, American Express Company (NYSE:AXP)’s rewards costs decrease, enhancing its bottom line. Moreover, when consumers have less money to spend, the amount of credit they owe rises, leading to an increase in interest earnings. Furthermore, its customers who spend a lot are more durable than the typical customer of its rivals, earning American Express a reputation for having the lowest rates of late payments in the sector.
Management increased its dividend payout to $0.70 a share, up by 8%, translating to a dividend yield of 1.04%. At a price-to-earnings ratio of 19.24, American Express Company (NYSE:AXP)’s valuation remains attractive relative to its near-term earnings growth.
By the end of June 2024, 68 out of the 912 hedge funds tracked by Insider Monkey had invested in American Express Company (NYSE:AXP). The largest shareholder was Warren Buffett’s Berkshire Hathaway, with a stake valued at $35.11 billion.
In its Q1 2024 investor letter, Artisan Select Equity Fund had this to say about American Express Company (NYSE:AXP):
“American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is largely a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.”
