Warren Buffett's $48 Billion American Express Stake Has Been a Huge Winner. The Latest Results Say the Streak Is Far From Over.

As of June 30, Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) owned 22.5% of the shares outstanding of American Express (NYSE: AXP). That position is worth $48 billion (as of Oct. 27). After Apple, the premium credit card enterprise is the conglomerate's largest holding. It represents 13.1% of the entire portfolio.

Picking winners seemed to come easily for the company's former chief executive officer, Warren Buffett. American Express shares have produced a total return of 440% during the past decade, outpacing the broader market. This has occurred even though they trade 18% off their peak.

The fit with Buffett's investing criteria is obvious. The business is easy to understand. Affluent cardholders give the company real pricing power. It owns a premium brand. And its closed-loop payments platform creates a network effect. These last two factors support its wide competitive economic moat.

The financial stock has clearly been a successful portfolio holding in the past. Its latest financial results might indicate that the streak is far from over.

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Weigh the latest quarter with long-term trends

During the third quarter, American Express showed investors that the positive momentum is holding up. Net revenue increased by 9% year over year to $20.1 billion.

The growth formula remains unchanged. Billed business, what management calls its payment volume, rose 8%. American Express added 3.1 million net new card members. And spending per user rose 5%. These are all encouraging signs.

Credit quality is stellar, as is typically the case for this company. The net write-off rate was just 1.8%. This is the main advantage of targeting affluent customers. They have stronger balance sheets than average borrowers. That means fewer missed payments, which helps to reduce the financial risk profile for the company by controlling losses.

The leadership team decided to raise it full-year profit projection. They now expect the business to report adjusted earnings per share (EPS) of $17.60 to $17.90. Based on 2025's figure, that would translate to a 15% gain at the midpoint.

If you're like Warren Buffett and you've been a long-term American Express shareholder, you know that these financial results aren't unusual. The company maintains an impressive track record. Key performance metrics underscore this view.

Return on equity was 38%during the past nine months, on pace for the best year since at least 2010. Chief Financial Officer Christophe Le Caillec highlighted American Express being on track to more than double revenue, more than triple EPS, and shrink the share count outstanding by more than a quarter during the past 10 years.

"This performance can be tracked back to our spend and fee-based model, characterized by high loyalty and engagement, greater differentiation versus competitors, lower credit risk, including in distress, lower capital intensity, and higher operating leverage from scale," he said on the Q3 earnings call.

The road ahead looks promising

Despite being considered a mature enterprise, American Express has a bright future. Two-thirds of its new card members come from Gen-Z and Millennial cohorts. Signing up a customer base that skews younger introduces a long runway of spending that boosts their lifetime value to the company. It can benefit the business financially for decades. Furthermore, it demonstrates that the brand is resonating with a new generation of adults.

Looking ahead, management is also focused on leaning heavily into artificial intelligence (AI). American Express, without a doubt, views this technology as a big opportunity. It's not just about cutting costs, which is the primary AI use case for most companies.

The business wants to innovate. It has a partnership in place with OpenAI that brings Resy reservations into ChatGPT. And the company is "working with OpenAI to launch an Amex plugin that will enable cardmembers to discover and enroll in Amex Offers," according to CEO Steve Squeri. Agentic payments are also a strategic priority.

American Express is poised to continue its winning ways. And Berkshire Hathaway will benefit.

American Express is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.