Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) portfolio contains dozens of stocks, most of which were selected by CEO Warren Buffett. While this makes for a long list of "Buffett stocks," many investors don't realize just how top-heavy Berkshire's portfolio is -- that is, how most of the portfolio's value is in just a handful of companies.
One of Berkshire's major holdings is American Express (NYSE:AXP), which has been a part of Berkshire's portfolio since Buffett invested in convertible preferred stock in the company in 1991. Here's a rundown of the numbers behind Berkshire's American Express investment, and why Warren Buffett likes the company so much.
What percentage of American Express is in Berkshire's portfolio?
American Express is one of eight bank stocks in Berkshire's portfolio, and although it is only the third most valuable stake behind Wells Fargo and Bank of America, it is the largest in terms of the percentage of the company Berkshire owns.
As of the latest available data, Berkshire Hathaway owns 151,610,700 shares of American Express, which represents a 17.2% stake in the company worth just under $14 billion.
Why does Warren Buffett like Amex so much?
American Express has a lot of qualities that Warren Buffett loves to see in his stock investments. For one thing, the company has an extremely valuable brand that it has built by amassing an affluent cardholder base and a successful closed-loop payment network. In fact, Amex's brand is more valuable than those of Visa and MasterCard combined, according to Interbrand's 2017 rankings.
Buffett also loves American Express' management team, and the shareholder-friendly way they've run the company. It's difficult to over-emphasize how much value Buffett places on good management when investing.
Buffett also realizes that with the increased competition in the credit card industry, American Express' path isn't likely to be without significant bumps in the road. For example, Amex lost its lucrative Costco partnership in 2015, and the stock proceeded to plunge by more than 30%. However, Buffett didn't sell a single share. He said that while the company's business model was "under attack," he loves the management team and competitive advantages the company has built. It looks like Buffett was right -- Amex's stock price has almost fully recovered, and is close to reaching a new all-time high.
Could Berkshire's Amex stake get even bigger?
While Buffett and Berkshire Hathaway's team haven't mentioned any plans to add to the Amex position, it certainly wouldn't surprise me if it happened. For one thing, Berkshire recently asked the Federal Reserve for approval to own up to 25% of the company -- which would represent an increase of nearly 50% from the current position size. While the request originated because of Amex's stock buybacks increasing Berkshire's ownership percentage, it does open the door for future stock purchases.
Additionally, Berkshire is sitting on about $100 billion in cash, most of which Buffett and his team are hoping to put to work sooner rather than later. Berkshire's preferred method of using its cash is to acquire entire companies, but I wouldn't be surprised to see the company use its cash hoard to increase some of its favorite common stock positions.
There's no way to predict with certainty if and when Berkshire will buy more of American Express, but I also don't expect Berkshire to sell any of its shares. In fact, I'd be very surprised if the credit card giant isn't a part of Berkshire's stock portfolio for decades to come.
Matthew Frankel owns shares of American Express, Bank of America, and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Mastercard, and Visa. The Motley Fool recommends American Express and Costco Wholesale. The Motley Fool has a disclosure policy.