This Is My Favorite Warren Buffett Stock, and It's One of His Biggest Bets (Hint: It's Not Apple or Alphabet)

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) has turned a small group of companies into enormous bets over the past decade, and Apple (NASDAQ: AAPL) has dominated that list for years. Given Berkshire chairman and CEO Warren Buffett's successful track record with stocks, investors are often looking at the company's stock holdings -- especially its biggest ones -- to get investment ideas. And now a newly disclosed stake in Google parent Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) has reinvigorated interest in Berkshire's investment moves.

Apple still soaks up more than a fifth of Berkshire's stock portfolio, and Alphabet is now a top-10 position, even if it remains modest in dollar terms compared with the conglomerate's very largest holdings. But when I think about which Buffett stock I most want to ride with for the next decade, I keep coming back to a more old-fashioned name.

American Express (NYSE: AXP) is Berkshire's second largest equity holding and one of its longest-tenured relationships. For me, it captures the heart of Buffett's approach: a durable franchise, advantaged economics, and a business capable of sending real cash back to owners in the form of dividends and share repurchases.

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Big conviction in a great business

As of the end of Q3, Berkshire owned 151.6 million American Express shares, valued at about $50 billion. That stake accounts for close to a fifth of Berkshire's equity portfolio, firmly entrenching American Express as Buffett's No. 2 holding behind Apple.

Unlike the Apple position, which Berkshire has been trimming, the American Express stake has remained unchanged for decades.

That kind of stability reflects the underlying business. American Express is a global payments company that issues cards, runs its own network, and works directly with merchants. Sitting on both sides of the transaction, it captures rich data on where and how card members spend, which helps the company target high-spending customers and refine rewards in ways rivals struggle to match.

The company's last full calendar year demonstrates how powerful that model can be.

In 2024, American Express's revenue rose 9% year over year to $65.9 billion, and earnings per share climbed 25% to $14.01. Additionally, management reported record card member spending, record fee revenue (the revenue the company collects from membership fees from its customers), and record new card acquisitions.

During the same year, it returned $7.9 billion to shareholders through $5.9 billion of share repurchases and $2.0 billion of dividends.

Continued momentum

Recent quarters show that momentum has not faded. Second-quarter revenue grew 9% year over year, while earnings per share increased 17%. And third-quarter revenue growth accelerated to a rate of 11%. Earnings per share for the quarter also accelerated, rising 19% year over year.

Benefitting the quarter was a refresh to its consumer and business Platinum cards in the U.S.

"The initial customer demand and engagement exceeded our expectations, with new U.S. Platinum account acquisitions doubling compared to pre-refresh levels," said American Express CEO Stephen Squeri in the company's third-quarter earnings release.

The successful refresh of the platinum card speaks to the company's pricing power, as it commands an annual fee of $895 -- a fee members eagerly pay to get access to airport lounges and a long list of other perks, including credits for travel, clothes, dining, and more.

And valuation is where American Express really stands out among Buffett's big bets. The stock has a price-to-earnings ratio of 24. While financial stocks often sport lower price-to-earnings multiples than stocks in other sectors, it's still notably below both Apple and Alphabet's price-to-earnings ratios of 36 and 30, respectively.

Sure, American Express is not cheap compared with many traditional financial stocks, but that multiple looks more reasonable given its consistent double-digit revenue growth, strong credit performance, and shareholder-friendly capital returns.

The risks, of course, are significant. A meaningful recession could slow card member spending and push credit losses higher, which would crimp earnings and reduce the company's ability to keep growing capital returns at the same pace. Further, competition from banks, buy-now-pay-later providers, and the big card networks remains intense.

Overall, I believe the stock looks attractive despite these risks. Sure, shares could get hit pretty hard in a weak economy. So, anyone who buys the stock today should prepare for volatility and should maintain a long-term view. But I truly believe that, 10 years from now, hindsight will show this as one of Berkshire's best-performing stocks.

American Express is an advertising partner of Motley Fool Money. Daniel Sparks and his clients have positions in Apple and Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.