Buffett's American Express Stake Yields 119% Return Over Five Years

Berkshire Hathaway's massive portfolio has dozens of positions, but one of its top holdings is American Express. The conglomerate has owned the credit card giant since the 1990s and currently holds a significant stake of nearly 152 million shares, giving it a sizable 22.5% position in the company.

This stake has proven to be a good investment for Berkshire Hathaway, as American Express has generated a total return of 119% over the past five years. The credit card giant's strong brand and network effects contribute to its economic moat, making it a high-quality business that deserves attention from individual investors.

Warren Buffett's philosophy focuses on identifying great businesses and letting them compound over long periods. When he finds a company he likes, it can be a powerful signal to the market that the business is worth closer examination. American Express has built an incredibly strong brand through its premium positioning targeting affluent customers, which boosts spending activity on the platform while supporting industry-leading charge-off rates.

However, investors may want to hesitate before buying American Express shares due to their valuation. The stock trades at a forward price-to-earnings ratio of 19.9, which is not expensive but also not cheap. Despite this, the business is performing well, with payment volume growing at its fastest pace in three years, driven by the spending behavior of millennial and Generation Z consumers.