We recently published a list of Warren Buffett Disciple Guy Spier’s 10 High Conviction Stock Picks. In this article, we are going to take a look at where American Express Company (NYSE:AXP) stands against Guy Spier’s other high conviction stock picks.
Guy Spier’s Aquamarine Capital Management is a Zurich, Switzerland-based investment manager that employs the same long-term oriented, value investment approach as Warren Buffett, who Mr. Spier proudly considers himself a disciple of.
Spier earned a degree in philosophy, politics, and economics from Oxford University in 1988 and followed that up with an MBA from Harvard Business School. Foollowing that, he spent several years working as a researcher and investor on Wall Street, including stints at Braxton Associates and Buffett’s Berkshire Hathaway, the latter of which inspired him to launch his own value investing fund in 1997.
Spier is noteworthy in the investment world for his $650,100 lunch (alongside Mohnish Pabrai) with Warren Buffett in 2007, which was purchased through a charity auction. Spier took several important lessons from that meeting, including the necessity of saying no, and ultimately wrote a book about his takeaways from that lunch and his broader investment journey entitled ‘The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment’.
Mr. Spier makes all of his firm’s investment decisions himself and is an even more ardent value investor than Buffett, holding on to many of his positions for several years without touching them. In the second quarter the fund added two small new positions to its 13F portfolio while otherwise leaving the rest of it untouched. Its 13F portfolio held $263 million worth of assets on June 30, 74% of which were invested in finance stocks.
Aquamarine’s total return stands at 874% since inception through the end of 2023, or 9% annually, outperforming the S&P 500’s 717% returns during that period. Spier’s fund hasn’t been as successful in recent years however. It returned 18.7% last year, which underperformed the market, the sixth-straight year it’s failed to top the market. 2000, 2002, and 2006 were three of the fund’s strongest years, as it beat the market by more than 20%.
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). That’s why you should pay close attention to this important indicator.
A close-up view of a payment terminal, capturing the sophistication of a payment network.
American Express Company (NYSE:AXP)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $48.6 million
Number of Hedge Fund Shareholders (3/31/2024): 68
The second-largest stake in Guy Spier’s 13F portfolio is American Express Company (NYSE:AXP), which has several of the same tailwinds buffeting it as noted with Mastercard above. AXP is also the third-most popular stock in Warren Buffett’s 13F portfolio as of March 31, with the Oracle of Omaha owning nearly 152 million shares. American Express is otherwise less popular than its larger rivals among hedge funds, with their ownership of the company remaining flat during Q1.
American Express Company (NYSE:AXP) enjoyed a strong second quarter, growing organic earnings by 21% year-over-year and by 44% when factoring in its sale of digital fraud prevention company Accertify to a private equity firm. Revenue also hit a record quarterly high during Q2, having grown by close to 50% in the last three years, and is expected to increase by about 10% this year. Analysts project the company’s earnings to grow 15% annually in the years to come, which will continue to support its dividend, which was raised by 17% this year.
Artisan Select Equity Fund discussed how American Express Company (NYSE:AXP)’s fee structure has helped drive profit growth in its Q1 2024 investor letter:
“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.”
Overall, AXP ranks 2nd on our list of Guy Spier’s high conviction stock picks. While we acknowledge the potential of AXP, our conviction lies in the belief that 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.