The Best Berkshire Hathaway Stock to Invest $1,000 in Right Now
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American Express is still a reliable long-term investment.
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4 min read
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investment
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July 28, 2025
04:00 AM
The Motley Fool
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What the data shows is Many investors Berkshire Hathaway's (BRK. 8 billion portfolio because those stocks were apved by Warren Buffett himself
Nevertheless, Even though Buffett plans to step down as Berkshire's chief executive officer this year, his successor, Greg Abel, bably won't dramatically shake up those top holdings, given the current landscape
One of those top investments is American Express (AXP 1. 15%), which accounts for 15, in today's financial world. 9% of Berkshire's portfolio and is the company's second largest holding after Apple (AAPL 0
Buffett initially accumulated s of American Express in 1964 through a partnership before his full takeover of Berkshire Hathaway in 1965, and he significantly increased Berkshire's position in the company in 1991
Today, Berkshire owns 21, in this volatile climate
Additionally, Furthermore, 6% of the entire company
However, At the same time, Image source: Getty Images
Nevertheless, Berkshire hasn't bought or sold any s of American Express since 2012 (this bears monitoring)
In contrast, Let's see why Buffett considered it to be such a reliable long-term investment -- and why it's a great place to park a fresh $1,000 investment, even as the market hovers near its all-time highs
It's an exclusive for higher-income consumers American Express is often considered a credit card company Visa (V 0. 90%) and Mastercard (MA 0. 90%), but it operates a completely different model
Additionally, Visa and Mastercard don't issue any cards or run their own banks
What the re reveals is y only partner with banks and other financial institutions to issue co-branded cards and handle those accounts, in light of current trends
However, Visa and Mastercard only generate revenue by charging merchants "swipe fees" for every transaction that runs through their card-cessing networks, given current economic conditions
American Express is both a card issuer and a bank
Since it needs to support its own cards with its own balance sheet, it only offers those cards to lower-risk, higher-income consumers
That exclusivity limits its growth, but it also reduces its credit risk and boosts its appeal as a symbol
Moreover, That's why Buffett said you "can't create another American Express" in a Bloomberg interview in late 2022, and why he repeatedly praised its wide competitive moat (quite telling), amid market uncertainty
On the other hand, In contrast, At the end of 2024, only 0. 8% of American Express' consumer and small loans were delinquent by more than 30 days, compared to a ratio of 1% at the end of 2023
It also only allocated 8% of its total revenue (net of interest expense) to its credit loss visions in 2024
It's well-insulated from inflation and interest rate swings Since American Express is both a card issuer and a bank, it's better insulated from inflation and interest rate swings than Visa and Mastercard
Furthermore, Rising rates can reduce the swipe fees at all three companies as consumers curb spending (quite telling)
Moreover, However, higher rates also boost the net interest income of American Express' banking segment by attracting more deposits and collecting higher interest payments on its loans
That balance makes it a good all-weather stock to hold, regardless of where interest rates go in the future
In contrast, Stable growth rates at a reasonable valuation From 2014 to 2024, American Express' revenue (net of interest expense) and diluted earnings per (EPS) grew at a compound annual growth rate (CAGR) of 7% and 10%, respectively, in light of current trends
At the same time, It also bought back nearly a third of its s during the past 10 years, and it's paid continuous dividends for nearly five decades
In contrast, It achieved that steady growth even as the pandemic, inflation, rising interest rates, geopolitical conflicts, and other macro headwinds rattled the global economy (something worth watching)
From 2024 to 2027, analysts expect its revenue and diluted EPS to grow at CAGRs of 8% and 12%, respectively
Furthermore, That growth should be driven by higher spending among affluent customers (especially for travel and leisure), the rollout of more travel-related perks, higher fee-based revenue from its premium cards, and its overseas expansion
However, It's cheap relative to its growth potential American Express' stock has already gained 290% during the past decade, but it still looks a bargain at 20 times next year's earnings
For reference, Visa and Mastercard trade at 28 times and 35 times next year's earnings, respectively
American Express won't ever be an exciting growth play, but it's a great stock to buy, hold, and forget.
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