Abel's First Big Move: Berkshire Hathaway Retains American Express Amid Underperformance

Berkshire Hathaway's new CEO, Greg Abel, made his first major decision as head of the conglomerate by retaining American Express in its portfolio. This move may seem counterintuitive given that American Express is currently underperforming its peers Visa and Mastercard year-to-date. However, a closer look at the company's fundamentals reveals that it remains rock solid.

American Express has been Berkshire Hathaway's second-largest holding for decades, and its stock price has increased significantly due to aggressive buybacks. These buybacks have reduced the share count outstanding, accelerating earnings-per-share growth and making the stock a better value. Additionally, American Express has a customer loyalty program that provides recurring revenue from cardholder and swipe fees.

In his first letter to shareholders as CEO, Greg Abel stated that Berkshire Hathaway's concentrated approach will continue, with limited activity in holdings such as Apple, American Express, Coca-Cola, and Moody's. He emphasized the importance of retaining exposure to high-quality financial stocks like American Express, which is distinct from other public equity holdings.