AUGUST 2, 2021
Warren Buffett. REUTERS/Rick Wilking
- Warren Buffett’s Berkshire Hathaway has made a $8 billion gain on American Express this year.
- Berkshire spent $1.3 billion for a stake in the credit-card group worth $26 billion today.
- Buffett’s former partnership owned 5% of American Express in the mid-1960s.
Warren Buffett’s Berkshire Hathaway has racked up an $8 billion gain on American Express this year, as one of its largest and oldest holdings has been a surprise outperformer.
The famed investor’s conglomerate owned 152 million shares of American Express at the last count, giving it a 19% stake. The financial-services group’s stock price has surged by about 45% this year, boosting the value of Berkshire’s position from $18 billion at the start of January to $26 billion today.
American Express has been one of the two best-performing stocks in the Dow Jones index this year, along with Goldman Sachs, which Berkshire exited last year. The credit-card company’s stock hit a record high in late July after it smashed Wall Street’s forecasts for its second-quarter earnings. Its revenues surged 33% year-on-year to over $10 billion, as consumer spending rebounded from the pandemic, while a cut to credit-loss provisions helped propel its net income up about nine-fold to $2.3 billion.
Berkshire first invested in American Express in 1994, and spent $1.3 billion to establish its current stake, meaning it has scored a roughly $25 billion unrealized gain in under 30 years. Notably, Buffett previously owned more than 5% of the company, as his Buffett Partnership plowed $13 million into the stock after the salad-oil scandal temporarily tanked its price in the mid-1960s.
American Express is one of the five biggest positions in Berkshire’s portfolio, while Buffett’s conglomerate is the company’s largest shareholder. Buffett has repeatedly emphasized the value of the American Express brand, framing it as a key competitive advantage, or “moat”, to fend off rivals.
