Warren Buffett Has Held American Express for Decades. Should You Own It Too?

Key Points

• Buffett didn’t hold Amex for decades by accident.

• The business model is simpler (and stronger) than it looks.

• American Express has built a system that rewards patient investors over time.

When Warren Buffett bought a stock, he usually held it for a very long time. One of his longest-held investments is American Express (NYSE: AXP), a company he first bought decades ago and that Berkshire Hathaway still owns today.

That alone makes it worth paying attention. After all, Buffett has seen countless companies rise and fall over the years. The fact that he stayed invested in American Express suggests that something deeper is at play.

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So what explains that staying power, and does it still make sense for investors today? Let’s explore further.

Image source: Getty Images.

A business built on customer spending, not borrowing

At its core, American Express makes money when people use its cards.

That might sound obvious, but there’s an important difference. Many financial companies depend heavily on card customers carrying debt and paying interest. American Express, on the other hand, earns a large portion of its revenue from transaction fees whenever customers spend. These fees accounted for 76% of its revenue.

Besides, instead of targeting everybody (which Mastercard and Visa do), it focuses on customers who tend to spend more — people who travel, dine out, and use their cards regularly.

This creates a more stable business model. Even if customers don’t carry a balance, the company can still earn consistently as long as spending continues. Over time, that has proven to be a reliable way to generate profit. During the past decade, American Express’ net income more than doubled from $5.2 billion to $10.8 billion.

So why do customers keep coming back?

American Express isn’t just competing on the convenience offered by a credit card. It has built its brand around a set of benefits that go beyond simple payments.

Think about travel perks, airport lounge access, dining offers, and exclusive experiences. These aren’t just extras; they encourage customers to keep using the card in their daily lives.

Once that habit forms, switching becomes less likely. People don’t just use American Express because they have to; they use it because they want to. Besides, there is a social element to the business, whereby owning an Amex card signals a certain social status.

Even with strong competitors like Visa and Mastercard, this kind of brand loyalty helps the company hold its ground.

A little financial engine to boost long-term shareholder return

There’s another reason Buffett has stayed invested for so long, and it’s less obvious.

American Express has a history of returning cash to shareholders through dividends and buybacks. Stock buybacks, in particular, play a powerful role over time.

When a company reduces its share count, each remaining share represents a slightly larger ownership stake. That means even steady growth can translate into stronger gains for shareholders. For perspective, American Express reduced its share count from 1 billion to 696 million during the past decade.

For long-term investors, this creates compounding. You’re not just benefiting from business growth; you’re gradually owning a larger share of the business. To illustrate the impact, earnings per share (EPS) grew much faster than profit during the decade, up from $5.1 to $15.4, an increase of more than 300%.

So, should investors own the stock?

American Express isn’t the fastest-growing company in the market, and it’s unlikely to deliver explosive returns overnight.

But that’s not why Buffett’s company has held it for decades. He stayed because it’s a business that earns consistently from customer spending, builds lasting relationships, and returns value to shareholders over time.

The opportunity today may look different from when Buffett first invested, but the core strengths remain largely intact. For investors willing to think long term and learn more about American Express, this is a stock worth exploring further.

Should you buy stock in American Express right now?

Before you buy stock in American Express, consider this:

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American Express is an advertising partner of Motley Fool Money. Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, and Visa. The Motley Fool has a disclosure policy.