Investment legend Warren Buffett, known as the Oracle of Omaha, has a reputation for identifying valuable companies that can generate significant returns for his conglomerate, Berkshire Hathaway Inc. One such investment was in American Express (AXP), a leading global provider of credit cards and financial services.
In August 1991, if you had invested $1,000 in American Express,效仿巴菲特的重要投资， today that investment would have grown to approximately $81,040. This substantial increase showcases the strength of American Express as a company and aligns with Buffett’s long-term investment philosophy.
As of today, American Express shares are trading at $273.69, reflecting a remarkable growth over the past three decades. This growth not only highlights the company’s resilience but also the foresight of investors like Buffett who recognize and capitalize on the potential of such businesses.
Buffett’s relationship with American Express began in the 1960s. But in August 1991, he made his first large-scale investment in the company, purchasing a significant stake worth around $300 million. This showed his confidence in American Express’s business model and future prospects. For ordinary investors, emulating Buffett’s investment might seem intimidating. However, a $1,000 investment at that time would have yielded extraordinary returns. The significant appreciation of American Express stock over the years highlights the power of long-term investing in quality companies. The Salad Oil Scandal in the 1960s piqued Buffett’s initial interest in American Express.
In 1963, Anthony De Angelis, founder of Allied Crude Vegetable Oil Company, exploited American Express’s lending practices. He used falsified salad oil inventories as collateral to secure loans, including substantial sums from American Express. When the fraud was uncovered, American Express faced significant financial and reputational damage. Despite this, Buffett saw an opportunity. Recognizing the enduring value of the American Express brand, he acquired a small stake (about 5%) for roughly $20 million. This early investment laid the foundation for his larger acquisition decades later. American Express has navigated various economic climates, from the credit card boom of the ’70s and ’80s to the challenges of the digital age.
The company’s ability to adapt and innovate has been a crucial factor in its sustained growth. In 2020, the COVID-19 pandemic brought unprecedented challenges. American Express shares dropped to as low as $66 as global lockdowns and travel bans affected consumer spending. Despite the downturn, Buffett held his position, echoing his famous saying: ‘Be fearful when others are greedy, and greedy when others are fearful.’ By 2022, American Express had not only recovered but reached new heights, with stock prices soaring to $196 per share. The company’s resilience during the pandemic and strategic shifts, like rebranding its Platinum Card and expanding digital services, have attracted a new generation of cardholders, especially millennials and Gen Z consumers. Today, Berkshire Hathaway holds 151,610,700 shares of American Express, accounting for approximately 20.
As of September 29, 2022, Warren Buffett holds 29% of American Express. This substantial stake highlights Buffett’s lasting confidence in the company.
Calculating the Returns: A $1,000 investment can grow to over $81,000. This remarkable return is due to stock price appreciation and the compounding effect of reinvested dividends over 33 years. In August 1991, when Buffett first invested, the share price was just $6.50. Today, the company is worth $273.90. The 153 shares one would have purchased in 1991 would be worth $41,906 based on share appreciation alone. Investors who have held onto their shares since 1991 have greatly benefited from the company’s growth and strategic initiatives. Conclusion: Warren Buffett’s investment in American Express is a compelling case study on the advantages of long-term investing and the significance of sticking with companies having strong fundamentals and a durable competitive advantage.If you had invested $1000 in American Express when Warren Buffett first did in 1991, you would have witnessed a compelling lesson in the virtues of patience and confidence in investment choices.
The growth of American Express and its expanding global presence serve as a testament to the enduring success of the company and Buffett’s investment acumen. This period may well be remembered as another chapter in the remarkable saga of American Express and Warren Buffett’s investment prowess.
