Buffett's Berkshire Hathaway Loads Up on American Express

Warren Buffett's Berkshire Hathaway has nearly 152 million shares in American Express (AXP), its second-largest holding. This investment was initiated in 1991 and has produced a total return of 497% over the past decade.

The reasons behind this significant investment are rooted in two key characteristics that support American Express's wide economic moat: brand power and network effect.

American Express's brand is considered a single, invaluable asset that drives its success. CEO Stephen Squeri noted in 2022 that customers view the company as having an emotional connection to its products and services, which attracts an affluent demographic with lower credit risk and higher spending power.

The network effect also contributes to American Express's competitive position. Its closed-loop payment system provides a value proposition that improves with more active cards and merchant acceptance locations, making it difficult for competitors to disrupt.