Why American Express Remains Berkshire's Hidden Gem After 5 Years of Growth

When you think about the Oracle of Omaha’s legendary portfolio—valued at $328 billion—what often comes to mind is Apple. But there’s another heavyweight that’s quietly outperforming expectations and commanding an increasingly significant slice of the conglomerate’s holdings. American Express, the premium payments company, has become a centerpiece of Berkshire’s strategy, with shares up 180% over the past five years (or 198% including dividends). For investors wondering whether long-term holdings truly pay off, this case study speaks volumes.

The $328 Billion Portfolio’s Standout Position

While Apple still dominates Berkshire’s headlines, the investment landscape has shifted considerably. Recent share reductions in tech positions have created room for another business to rise to prominence. Berkshire now owns 22.1% of American Express’s outstanding shares—a stake that’s grown to represent 16.5% of the entire portfolio. This isn’t accidental. American Express continues executing aggressive buyback programs, which means Berkshire’s ownership percentage compounds over time without additional capital deployment. It’s a textbook example of how time and patience amplify wealth.

A Brand That Commands Premium Pricing Power

What makes American Express so attractive to Buffett and his investment team? Start with the intangible asset that many overlook: brand equity. American Express has built a fortress-like position within the credit card industry. The company’s premium card offerings convey exclusivity and status to affluent customers—precisely the demographic with the spending power that directly flows to the bottom line.

This pricing power manifests in concrete ways. Between 2020 and 2025, the average annual fee per card climbed 75%. Most management teams would struggle to implement such increases without customer defection, but Amex executed them seamlessly. Additionally, the company’s delinquency and charge-off rates consistently run below industry averages, indicating a higher-quality customer base and superior risk management. These aren’t just numbers—they’re proof of durable competitive advantages.

Sustainable Growth Fueled by Economic Expansion

The engine driving American Express’s performance isn’t complicated, but it’s powerful. As economies grow, consumers and businesses spend more. This tailwind has consistently lifted Amex’s results. Over the past decade, the company’s revenue (net of interest expense) increased 120%. Diluted earnings per share during the same period surged 205%—nearly doubling revenue growth.

Management’s stated ambition is crystal clear: achieve mid-to-high single-digit revenue growth and mid-teens earnings expansion on a long-term basis. These targets reflect management’s confidence in the structural tailwinds from rising cashless transaction penetration and increasing customer affluence.

The Valuation Question: Timing vs. Quality

Here’s where the investment thesis faces a legitimate headwind. American Express currently trades at a price-to-earnings ratio of 23.3—a valuation multiple that has expanded 124% over the past decade. Translation: you’re paying meaningfully more for each dollar of earnings today than investors were paying years ago. For cautious investors who prioritize margin of safety, this creates discomfort.

The market has clearly recognized American Express’s quality. Whether that recognition has priced in all future benefits is the central question. Historically, Berkshire waits patiently for better entry points rather than chasing elevated valuations, even when the underlying business is excellent.

The Long-Term Value Equation

Stepping back from quarterly noise, the real story is about long-term wealth creation. How long is 1 billion minutes? It’s roughly 1,900 years—a useful reminder that real wealth compounds over decades, not quarters. American Express’s 180% return over five years represents annual gains of approximately 23% (annualized). That’s the kind of performance that transforms portfolios when held patiently.

Berkshire’s 22.1% ownership stake signals something profound: the company’s leadership trusts American Express to compound value over an extended holding period. The 16.5% portfolio weighting isn’t a tactical position to be trimmed on any dip. It’s a core conviction about where capital compounds over time.

What Smart Investors Should Consider

The path forward depends on your temperament and time horizon. If you’re willing to hold for years and you believe in American Express’s sustainable moat—its brand, customer quality, pricing power, and economic tailwinds—then current valuations might be acceptable. You’re essentially paying a premium for predictable long-term returns.

If you prefer margin of safety or you’re uncomfortable with P/E multiples in the low-20s, patience is your friend. History suggests opportunities will emerge to purchase quality at better prices. The investment world rarely rewards rushing into positions simply because they’re already performing well.

The Bottom Line

American Express represents exactly the type of business Buffett gravitates toward: a company with a durable competitive advantage, pricing power, and secular growth drivers. The 180% return over five years wasn’t luck—it was the natural result of excellent execution and favorable industry dynamics.

Whether you should buy today depends on your investment philosophy. What’s undeniable is that Berkshire’s conviction in American Express—reflected in both the absolute dollar amount and portfolio weighting—speaks to the company’s long-term value potential. Sometimes the best investments aren’t the flashiest; they’re the ones that quietly compound wealth across multiple market cycles, the kind of multi-year holds that turn modest time investments into extraordinary financial outcomes.