Greg Abel Has 75% of Berkshire Hathaway's Portfolio Invested in Just 8 Stocks. Is the 1 That's Lagging Behind the S&P 500 the Best Buy Now?

It hasn't even been a year since Warren Buffett made Greg Abel chief executive officer of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB). Already, Abel has made a number of major portfolio overhauls, including trimming or eliminating stakes in many smaller positions, catapulting Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) to a top-five holding, and identifying Apple (NASDAQ: AAPL), American Express (NYSE: AXP), Coca-Cola (NYSE: KO), and Moody's (NYSE: MCO) as companies Berkshire expects to compound for decades.

Abel's approach is a testament to Buffett's philosophy of finding exceptional businesses and holding concentrated positions in them, rather than over-diversifying into companies Berkshire deems lower-quality.

Apple, American Express, Coca-Cola, Bank of America (NYSE: BAC), Alphabet, Chevron (NYSE: CVX), Occidental Petroleum (NYSE: OXY), and Mitsubishi (OTC: MSBHF) (OTC: MTSUY) make up a combined 75% of Berkshire's $365.2 billion public equity portfolio. With the exception of credit-card company American Express, all of these core holdings have outperformed the S&P 500 (SNPINDEX: ^GSPC) during the past year.

Here's why American Express is lagging behind the index, and why it could be one of the best Berkshire stocks to buy in September.

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Solid earnings and guidance from American Express

American Express outperformed the S&P 500 for five consecutive years heading into 2026 -- putting pressure on the company to continue delivering impeccable results.

In the six months ended June 30, the company's revenue and net income rose by double-digit percentages, including a 14% increase in diluted earnings per share (EPS). It also reduced its share count by 3% through buybacks, which helped EPS gains outpace net income growth.

The company continues to increase its total number of cardholders. And spending among existing members is at its highest level in three years, adjusted for foreign exchange rates. American Express also raised its full-year outlook, and it now forecaste 10% year-over-year revenue growth for full year 2026.

AAPL Total Return Level data by YCharts

Given the excellent results and forecast, you may be wondering why American Express has produced a total return of less than 1% during the past year while the other seven largest Berkshire positions and the S&P 500 have generated sizable gains. The answer is likely the cost of attracting and retaining members through generous cardholder perks.

Why American Express stock is under pressure

In fiscal 2025, American Express spent twice as much on cardmember rewards as it collected in net card fees. So in theory, the average American Express Gold Card member pays $325 in annual fees to American Express for the card, but American Express spends $650 on average on their rewards. American Express wins the loyalty of the cardmember through the value the rewards provide, and makes up for the loss through swipe fees from merchants -- which it refers to as discount revenue -- as well as interest on credit card and loan balances.

Still, consolidated expenses in the second quarter of 2026 rose 12% year-over-year, which outpaced consolidated revenue growth of 10%.

Expenses outpacing revenue can lead to lower margins. And as you can see in the following chart, America Express' sales and EPS have reached all-time highs -- but its gross margin is also at its lowest level in a decade.

AXP Revenue (TTM) data by YCharts

Granted, part of the margin compression is due to the timing of American Express' refreshed U.S. Platinum cards, which feature a relatively high annual fee of $895 but also more generous rewards and one-time point bonuses. In its Form 10-Q filing for Q2 2026, American Express noted that "Marketing expense increased 6% year-over-year as we continued to invest to acquire, engage and retain high-spending, high credit-quality customers."

Unlike Visa (NYSE: V) and Mastercard (NYSE: MA) -- which are pure-play payment processors that partner with financial institutions to issue cards and bear credit risk -- American Express is both a payment processor and a card issuer. So while American Express wants to attract high-spending, affluent clients to maximize its swipe fees, it also doesn't want customers to spend to the point where they lose their credit quality. In this vein, the high marketing budget is somewhat justifiable because of the lifetime value of acquiring and retaining a quality American Express cardholder. This is especially true for younger generations like millennials and Gen Z, who are American Express' largest and fastest-growing cohort.

Aside from its lower margins and higher expenses, another reason American Express may be under pressure is concern about slowing economic growth and, in turn, lower discretionary spending -- even among affluent consumers. Or possibly artificial intelligence (AI) hitting the job market, especially among high-salary corporate employees. However, neither of those factors has yet to show up in America Express' results.

American Express can continue rewarding long-term investors

American Express will be more vulnerable than Visa and Mastercard amid economic uncertainty and shifts in consumer spending on discretionary goods. But investors who believe in the American Express ecosystem, the company's risk management, and its ability to attract and retain cardholders are getting an excellent opportunity to buy the stock at a compelling valuation of 19.7 times trailing-12-month earnings.

The durability of American Express' business model, paired with its attractive valuation, makes it arguably the best buy among Berkshire's eight largest holdings in September.

American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Daniel Foelber has positions in American Express. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, Berkshire Hathaway, Chevron, Mastercard, Moody's, and Visa. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.