Warren Buffett's Investment in American Express Stock Turned Into a 40-Bagger Success. Here's the Secret Behind It

When Warren Buffett first invested in American Express (NYSE: AXP), the thesis seemed straightforward: Buy a high-quality business and let it grow over time.

Decades later, that investment has delivered roughly 40 times his original capital. Most investors credit that success to factors such as brand strength, customer loyalty, and the company's premium positioning. But there's a quieter force at work, one that often goes unnoticed.

American Express didn't just grow. It systematically increased each shareholder's ownership over time.

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The overlooked driver: per-share earnings growth

It's easy to focus on how much a company grows its revenue or profit. But the Oracle of Omaha focused on something else: how much of that growth accrued to every share.

American Express has long generated high returns on equity (often 20%-30%), supported by a premium customer base and strong spending volumes. These have supported long-term revenue and profit growth.

But how the company deployed that capital is what truly amplified shareholder returns. Instead of pursuing large acquisitions, it consistently returned cash through dividend payments and share repurchases.

In particular, the latter is the secret to Buffett's massive return. Over the past decades, American Express has meaningfully reduced its share count while continuing to grow earnings. Those consistent buybacks turned a 10% initial stock ownership to 22% by 2025.

The result is that Buffett's ownership of American Express' profits has more than doubled, and that has contributed handsomely to its massive return over the decades.

Buffett's "automatic ownership increase"

Buffett has long touted that his preferred holding period is forever, and that's for good reason -- just take the American Express example for illustration. Because American Express has regularly reduced its share count, Berkshire Hathaway has been able to increase its ownership stake and collect rising dividend income, all without deploying additional capital.

In fact, Berkshire Hathaway's investment cost has fallen slightly from $1.4 billion in 1995 to $1.3 billion (presumably as the company sold some stocks during these buybacks) in 2025. Moreover, it collected $479 million in dividends in 2025, more than 30% of its investment in the stock.

In effect, American Express has been reinvesting on Berkshire Hathaway's behalf. That's a rare dynamic. Most companies either dilute shareholders or allocate capital inefficiently. American Express has largely done the opposite.

What does it mean for investors?

There are two simple takeaways. One, find profitable companies that consistently buy back their own shares, and own the stocks for the long term.

Two, while American Express is no longer a hidden opportunity, the company still generates strong cash flows and returns excess capital through buybacks. That means it can still deliver solid per-share earnings growth exceeding revenue growth.

Investors looking to own a proven business that can continue to grow its EPS at a decent rate should keep an eye on American Express -- and companies like it.

American Express is an advertising partner of Motley Fool Money. Lawrence Nga has 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.