Warren Buffett, the billionaire investment manager and Chairman/CEO of Berkshire Hathaway, famously known as the Oracle of Omaha, has long been bullish on American Express Company (NYSE: AXP) stock. His faith in the company dates back to the first quarter of 2001, when Berkshire Hathaway first invested in the company.
Since that time, American Express stock has soared by approximately 350% from its value in mid-February 2001, consistently meeting and exceeding Wall Street’s estimates.
Berkshire Hathaway’s initial investment in American Express stock was made when the stock was trading at approximately $40. Fast forward to the present day, and the stock is trading at around $187, translating into an impressive growth of over 3.5 times the initial investment.
For investors who might be kicking themselves for missing out, consider this: if you had placed $1,000 into the stock at roughly the same time that Buffett began championing it, your investment would have ballooned to about $4,530 today – a mammoth 353% return. On an annualized basis, that’s a healthy 9.2% compound annual growth rate (CAGR).
As per the latest 13F filing, American Express represents the third-largest holding in Berkshire Hathaway’s portfolio, commanding an impressive 7.12% stake. Effectively, Buffett’s Berkshire Hathaway owns over 20% of the company.
Over the past year, the stock has seen a meteoric rise of 20.5%. With such rapid gains, one might wonder if there is any upside remaining. Despite the steep climb, American Express seems to be in a robust position, especially with the Federal Reserve’s shift to lower rates this year. Moreover, the abatement of inflation is expected to stimulate credit card spending, which would be advantageous for Amex’s business. As a bank holding company, it benefits from diversified revenue streams, reduced borrowing costs, and access to Federal Reserve funding.
Currently, financial sector investors view Amex as a Neutral-rated stock as per consensus estimates.
An analysis of the company’s prospects shows that several analysts have raised their price targets beyond the consensus estimates for Amex stock:
- Deutsche Bank initiated coverage on Jan. 10 with a Buy rating and a price target of $235 on the stock.
- JP Morgan’s coverage from Jan. 4 raised their price target from $167 to $205.
In light of this, it becomes apparent that American Express continues to exhibit potential for growth and remains an attractive investment prospect in the current market landscape.
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