In a market obsessed with flashy growth and AI-driven momentum, one of the most consistent performers in the S&P 500 continues to deliver results with almost no hype.
Shares of American Express are up more than 25 percent over the past year, but somehow still don’t get the credit they deserve.
This is not a speculative growth stock or a pandemic-era favorite. This is a global brand with pricing power, customer loyalty, and the kind of balance sheet that thrives in almost any environment.
It’s no surprise that Warren Buffett owns more than 20 percent of the company and hasn’t sold a single share in over a decade.
The second quarter of 2025 provided yet another reminder of why American Express warrants serious consideration from long-term investors.
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A Business That Knows Its Customer
American Express continues to stand out in the credit card and payments space, not just for its brand, but for its operating model.
Unlike Visa and Mastercard, which act as payment networks, American Express (AmEx) is both the issuer and the bank behind its cards.
That means it owns the customer relationship, controls lending risk, and captures a larger share of the economics. This model also allows it to be highly selective about who it serves.
The company is laser-focused on high-income consumers and small businesses with strong credit profiles.
That exclusivity limits volume growth compared to mass-market players, but it makes for an incredibly resilient business.
In Q2, just 0.8% of loans were delinquent by 30 days or more, a figure significantly better than the industry average.
Even in a year marked by tariff disruptions, geopolitical concerns, and volatile interest rate expectations, AmEx cardholders continued to spend.
Total revenue rose 9 percent to $17.9 billion, exceeding Wall Street estimates. Net income hit $2.9 billion, and earnings per share landed at $4.08, again ahead of expectations.
The company’s core value proposition remains unchanged: to provide customers with a premium product, foster loyalty through lifestyle perks, and avoid pursuing lower-tier credit risk.
That playbook continues to work.
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The Competitive Moat Is Getting Deeper
If you are looking for a textbook example of a company with a real moat, this is it.
From brand equity to network effects to merchant relationships, American Express has layers of durable advantage.
It is not just the iconic Platinum card or the airport lounge access.
Over the past few years, the company has made strategic acquisitions like Resy and Tock, which offer exclusive reservations and dining experiences to cardholders.
These lifestyle enhancements build emotional loyalty and justify premium fees.
This quarter, American Express announced its largest-ever investment in a card refresh, signaling its commitment to staying ahead in the premium space.
While Citi and other competitors are rolling out new offerings to attract high-income users, AmEx’s decades of brand equity and platform integration give it a massive head start.
As CFO Christophe Le Caillec put it, “Bring it on.” That confidence is backed by more than just marketing.
The company has built something hard to replicate, with trust, exclusivity, and habit.
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Resilience in an Uncertain World
It is easy to look at a $310 stock and ask if it has already run too far. But consider the context.
This stock has increased by more than 60 percent over the past twelve months and nearly 290 percent over the last decade.
And yet, it still trades at a forward P/E of around 21, well below names like Visa or Mastercard, which command multiples of 28 and 35, respectively.
American Express has grown its earnings per share at a 12% annual rate over the past decade. Analysts expect continued growth in the low double digits, supported by healthy spending, higher fee-based revenue, and overseas expansion.
More importantly, this is a business that can withstand fluctuations across economic cycles.
Its hybrid structure allows it to benefit from rising interest rates through higher net interest income, while still riding a rebound in discretionary spending when rates fall.
That makes it one of the few financials that can operate effectively in multiple macroeconomic scenarios.
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Capital Returns That Actually Matter
Buffett’s position in AmEx is not just about the business model. It is also about capital allocation. This is a company that knows how to reward shareholders.
Over the past 12 months, AmEx generated $12.1 billion in free cash flow. It returned over $7.9 billion of that through dividends and buybacks.
The company has raised its dividend for four consecutive years and still has room to grow, with a payout ratio well below its long-term target.
Nearly a third has reduced share count over the past decade. That is real value creation for long-term holders.
This is the kind of shareholder discipline that often gets overlooked when AI headlines dominate the news. But over time, this is the compounding effect that builds wealth.
Risks to Watch
Even a high-quality name like American Express comes with risks investors should be aware of:
1. Valuation Compression
While the stock isn’t excessively priced, it does trade above its historical average. If growth slows or macro conditions deteriorate, the multiple could contract, which would pressure total returns even if earnings hold steady.
2. Economic Sensitivity
AmEx cardholders are high-income, but discretionary categories, such as travel and dining, still account for a significant portion of their spending. If there’s a sharp pullback in affluent consumer confidence, volume growth could soften.
3. Competitive Pressure at the High End
Citi, JPMorgan, and fintech upstarts continue to target the premium space with new rewards and perks. While AmEx has a strong head start, customer expectations are rising. The company will need to continue investing heavily to maintain loyalty.
4. Credit Risk Misjudgment
So far, delinquency rates have remained low; however, American Express still takes credit risk directly onto its balance sheet. A surprise in loss provisions or a shift in borrower behavior could weigh on earnings.
5. Regulation and Policy Shifts
As both a lender and a payments platform, AmEx is exposed to changes in financial regulation. New rules on interchange fees, data privacy, or credit standards could affect profitability.
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Final Take
American Express is not going to double overnight. It is not the next generative AI platform or a turnaround story waiting for a spark.
However, it is one of the most reliable businesses in the market, boasting a wide moat, a loyal customer base, and steady growth.
It handles its own risk, controls its own network, and targets a high-income customer segment that continues to spend despite economic fluctuations.
If you are building a portfolio with staying power, this is exactly the kind of name to own. The stock may not look cheap on paper.
Still, when you consider the durability of the business, the quality of the customer, and the consistency of the results, the value becomes clear.
AmEx is not just a financial stock. It is a premium compounder that keeps proving why it belongs in the top tier.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
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