Buy This Berkshire Hathaway Stock Now and Thank Yourself in a Decade

When Warren Buffett's hand-picked successor, Greg Abel, took the reins as chief executive officer of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) this year, it was unclear how he would react to Berkshire's large positions in core holdings.

In his Feb. 28 letter to shareholders, Abel wrote that investors should expect concentration in Apple, American Express (NYSE: AXP), Coca-Cola, and Moody's to continue with limited activity unless Berkshire sees "fundamental changes in long-term economic prospects." In other words, Berkshire is committed to holding these stocks over the long term.

American Express has been one of Berkshire's greatest investments. The conglomerate owns 22% of the company at a cost basis of just $1.29 billion, compared to a market value at the time of the shareholder letter of $56.1 billion. Berkshire last year collected $479 million in American Express dividends -- meaning that less than three years of dividends exceed the cost basis on its entire American Express position.

Here's why American Express is one of the top buys in the financial sector.

Image source: Getty Images.

American Express has a straightforward cost structure for delivering consistent growth

American Express has an exceptional track record of managing the credit risk of the cards it issues, as evidenced by its relatively low net write-off rates -- essentially the sunk costs of debt that is unlikely to be repaid.

In fiscal 2025, American Express collected almost $10 billion in net card fees, up 18% year over year.The figure will jump even more in fiscal 2026 -- the first year the $895 annual Platinum Card fee takes effect.

Despite the high fees, cardholders are getting a great deal on points, as American Express spent a staggering $18.4 billion on card member rewards in fiscal 2025 -- nearly double what it collected in net card fees.

Data source: American Express.

American Express can afford high card member rewards expenses because its main revenue stream isn't the fees it collects from cardholders, but rather the discount revenue (swipe fees) it collects from merchants for processing transactions. It also generates significant revenue from net interest income (interest on credit card and loan balances).

Steady growth at a compelling value

American Express finished fiscal 2025 with a 10% increase in revenue and 15% increase in adjusted earnings per share. Its strong margins, coupled with consistently rising earnings, enable it to regularly return capital to shareholders through stock repurchases and dividend growth.

Buybacks and dividends are why Berkshire has been able to increase its percentage ownership of American Express and its annual dividend income, even though it hasn't bought any shares for decades.

To top it all off, American Express is a reasonable value, with a 19.5 price-to-earnings (P/E) ratio and 17.2 forward P/E compared to a 10-year median P/E of 17.8.

Add it all up, and American Express stands out as one of the most well-rounded financial stocks for investors to buy and hold for the next decade.

American Express is an advertising partner of Motley Fool Money. Daniel Foelber has positions in American Express. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Moody's and is short shares of Apple. The Motley Fool has a disclosure policy.