Warren Buffett is an investing icon. His track record compounding capital for Berkshire Hathaway has made him a legend. The smartest retail investors closely follow his moves to find ideas for their own portfolios.
In the conglomerate’s $258 billion portfolio, the second-largest holding shouldn’t be ignored. It’s a position the Oracle of Omaha has held for decades, so it deserves a closer look from investors.
Is this financial services enterprise the best Buffett stock to buy with $1,000 right now?
A Buffett-approved economic moat
For a business to succeed over a long time, it needs to possess an economic moat. American Express (AXP -0.93%) has a durable competitive strength in the form of its brand. Its popular credit cards are positioned at the premium end of the market, naturally attracting wealthier customers.
That brand supports the company’s pricing power. To accept it as a method of payment, Amex charges merchants more than other card networks. The business is also able to raise annual fees for customers on its credit cards. The average fee per card (on an annualized basis) was $111 in Q1 2025, up 185% from 10 years ago.
By directly connecting 90 million merchants with 147.5 million active cards, American Express has a network effect. As the payments platform grows, it becomes more valuable to both of its key stakeholder groups. This creates a virtuous cycle that is extremely difficult to disrupt.
By having a customer base with high spending power, while also benefiting from the overall growth of the economy and in spending, American Express has registered sustainable growth over time. Between 2014 and 2024, revenue and diluted earnings per share (EPS) have increased at compound annual rates of 6.7% and 9.7%, respectively.
Executives expect the good times to continue. Over the long term, they believe revenue will increase by at least a 10% annualized clip, while EPS will grow by a mid-teens rate.
Thinking about a recession
The market is clearly worried about the potential for an economic downturn, thanks to President Donald Trump’s ongoing tariff announcements. As a lender, as well as a business dependent on spending activity, it makes sense that Amex shareholders are worried. In a recessionary scenario, revenue and earnings could take a hit.
Some important factors may help alleviate investor fears. For starters, American Express caters to a more affluent customer base. When times get tough, these cardholders should be able to navigate the economy better than the average person, minimizing losses for Amex. In Q1 2025 (ended March 31), the company reported a net write-off rate of 2.1%, unchanged year over year.
The leadership team feels confident today because of trends within certain spending categories. There was “continued strength in restaurant and lodging spending,” according to CFO Christophe Le Caillec.
It wasn’t all rosy, though. Management said that “[w]e did see a deceleration in airline spending relative to 2024 trends.” Nonetheless, Amex saw a 6% jump in billed business, which measures payment volume, in Q1.
Economic headwinds can cause investors to lose sleep, but it’s important to focus on companies that can weather the storm. Amex has what it takes to not only survive but thrive on the other end of a possible recession.
Valuation plays a role
The market still doesn’t seem optimistic. As of this writing, shares have gotten hammered this year, down 18% in 2025. This is despite the company continuing to post solid operating results.
Here’s where the opportunity is for long-term investors. At a price-to-earnings ratio of 16.9, below the stock’s historical three-year average, the market is giving investors a great deal to buy a high-quality business at a compelling valuation. Investing $1,000 in Amex shares looks like a smart move today.
American Express is an advertising partner of Motley Fool Money. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
