We recently published a list of Warren Buffett’s 10 Longest-Held Stocks. In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against other Warren Buffett’s longest-held stocks.
‘The Oracle of Omaha’
Known as the Oracle of Omaha, Warren Buffett will undoubtedly go down as one of the greatest and most prosperous value investors in history. During the booming stock market of the 1960s, the billionaire investor used his investment partnership to purchase Berkshire Hathaway, a struggling textile company in New England, which now stands as a global titan.
Buffett has often underlined the need to fully know the internal operations of a company before making any investments. His strategy focuses on finding companies with strong, scalable models that are ready for expansion and market leadership, as well as those that have much to gain from a subsequent increase in stock value. Both investors and market analysts have frequently praised this methodical, long-term investment strategy, particularly in light of Berkshire becoming one of the most recent non-tech companies to reach a $1 trillion market capitalization.
However, despite a generally strong market performance for much of 2024, Buffett appears to have shifted towards a more defensive stance. As interest rates climbed and economic conditions weakened, Buffett significantly reduced his holdings in companies experiencing rapid valuation increases. By late 2024, Berkshire had amassed over $325 billion in cash and cash equivalents, predominantly held in U.S. Treasury bills. This suggested that Berkshire avoided making major investments in popular stocks, even during periods of market optimism. That said, Warren Buffett’s decision to hoard cash might not be a random one. In fact, it mirrors strategies he has used in the past during previous financial downturns. As an example, the billionaire adopted a somewhat similar approach at the onset of the dot-com bubble in the early 2000s and again in the lead-up to the 2007-2008 financial crisis. In both these instances, Buffett foresaw market turbulence and positioned Berkshire to navigate the challenges by maintaining substantial liquidity.
Warren Buffett’s Stance on Cryptocurrency
Warren Buffett has repeatedly stated that he is not a fan of cryptocurrency. During Berkshire’s 2018 annual shareholder meeting, Buffett called Bitcoin “probably rat poison squared.” In Berkshire’s 2022 shareholder meeting, the billionaire once again stated:
“If you told me you own all of the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything.”
Recent reports, however, indicate that the Oracle of Omaha seems to be softening his stance on cryptocurrencies. Berkshire has invested in Nu Holdings, a digital banking company based in Brazil that supports the cryptocurrency market and operates its own platform. In a 2021 Series G funding round, Buffett’s company contributed $500 million, followed by another $250 million. Nubank Crypto, Nu’s cryptocurrency platform, was launched in 2022 and supports Bitcoin, Ethereum, and Polygon. Berkshire’s stake in Nu increased from 0.1% in the fourth quarter of 2022 to 0.4% in the third quarter of fiscal 2024.
Our Methodology
To create our list of Warren Buffett’s longest-held stocks, we analyzed his Q3 2024 investment portfolio and selected stocks that he has consistently held for the longest duration. These figures were sourced from the Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up view of a payment terminal, capturing the sophistication of a payment network.
American Express Company (NYSE:AXP)
Warren Buffett’s First Major Purchase: 1991
Berkshire Hathaway’s stake in Q3 2024: $41.1 billion
American Express Company (NYSE:AXP) is a leading bank holding company that provides a comprehensive digital payments platform that includes credit cards, charge cards, and financing options. One of the primary reasons it ranks as an industry leader is due to its premium brand. Customers with higher incomes who can spend more than the typical consumer are drawn to the company because of its reputation.
On January 27, RBC Capital Markets reaffirmed its Outperform rating for American Express Company (NYSE:AXP) and raised its price target from $330 to $350. The adjustment came as a response to the company’s recent fourth-quarter earnings report, which highlighted a number of key performance metrics. According to RBC, American Express’ core results were strong, with revenue rising 9.3% annually to $60.76 billion, fueling positive consumer spending trends. This occurred in the context of higher costs, which the analysts believed were reasonable. The credit quality was also described as extremely stable, and the provisions were slightly lower than anticipated.
American Express Company (NYSE:AXP) was highlighted by GreensKeeper Asset Management in its Q3 2024 investor letter:
“American Express Company (NYSE:AXP) was our second-largest contributor this quarter, with a return of +17.1%. AXP continues to invest in its customers beyond traditional credit card rewards, recently enhancing its Global Dining Access to provide Platinum cardholders with exclusive reservations at premier restaurants worldwide. This focus on unique experiences has attracted a younger demographic, with millennials and Gen Z driving most of the customer acquisition and card spending growth in recent quarters. Exclusive events are more challenging to replicate than standard point reward systems, presenting a challenge for competing card issuers that lack AXP’s scale and concentrated base of affluent consumers. AXP has fine-tuned its offerings over decades to strengthen its network effect and shows no signs of slowing down.”
Overall, AXP ranks 2nd on our list of Warren Buffett’s longest-held stocks. While we acknowledge the potential of AXP, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AXP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.