American Express (AXP -2.74%) doesn't get quite as much attention as some of the newer fintech giants like PayPal (PYPL -1.12%) and Square (SQ 0.15%), but maybe it should. In the Aug. 30 episode of The Rank on Fool Live, longtime contributors Matt Frankel, CFP, and Jason Hall ranked the 10 largest stock holdings in Berkshire Hathaway's (BRK.A -1.63%) (BRK.B -1.66%) portfolio. You might be surprised to learn that they ranked American Express No. 3. Watch the clip to find out why. 

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Jason Hall: I just have to be careful and not talk too much about American Express because I'm just in love with this business. Because I just view it as like the underappreciated digital payments company sometimes. For good reason, I guess, because AmEx is, the name's as old as banking and in the U.S., it seems like it's been around since the late 1800s. Wasn't even a bank back then. It's a business that's gone through so many iterations and I think maybe that's what's interesting to me about it, Matt, because the traveler's checks business, like the express package business, that's how it got started, then getting into the charge card business in the '50s and '60s. This is a company that's reinvented itself. It's always been tied to the financial community and largely focused on people of means. That's always where it's been focused.

Matt Frankel: That focus gives it pricing power. I used to run a business myself. I can tell you that we paid American Express more to process payments than Visa (V -1.37%) or Mastercard (MA -1.12%), by a significant amount. I feel like consumer or investors overlook American Express in the fintech space in the same way they overlook companies like GM (GM -2.72%) in the electric car space. They see it as a legacy player. Buffett first invested in American Express in 1963. That's not the stake they own today, he's sold it since then.

Hall: Back when he made that move, it was like a total value play because the company was going through some problems and he looked at an opportunity to pick up dollars for nickels almost.

Frankel: Yeah. He probably should've kept it. The current stake originated in 1993. He's added to it a few times since, Berkshire's cost basis in AmEx is $8.49 a share if you're curious. It's currently in the $160s, so about a 20X for Buffett.

Hall: It worked out pretty well.

Frankel: In less than 30 years, it's been a 20X. That's a pretty successful investment. That's not including dividends. Just stock prices have been 20X. It's a good dividend investment, too. I especially loved the focus on the younger generations of affluent. That's something that other credit card issuers aren't doing nearly as well. When you think about the American Express Platinum Card, which is the go-to card that's in my wallet right now, to be able to get people to pay $550 a year to have a credit card, you really have to add value, especially the millennial generation, which is really value conscious. They offer benefits that appeal to the young professionals like Uber (UBER 1.58%) credits. Each month, I get $15 and free Uber rides. During the pandemic, they pivoted to Home Depot credits for mobile ordering, food delivery credits if you ordered something. I don't know if you've ever been to Goldbelly. It's an awesome website where I can order food that's made near you to be delivered to me and I live across the country. They gave me $50 credit for Goldbelly that you could use up to three times. No minimum purchase, $50 free, to retain their customer base during the COVID pandemic. That's a great benefit. We used it to order stuff from Carlo's Bakery, the cake boss bakery in New Jersey, what a great way to retain your core clientele during the pandemic. Point being they've just done such a great job with the millennial generation. These are customers that could be with American Express for 50 years. I feel like the other credit card companies do a great job of courting the high-end consumers but the older ones. American Express is really focused on the younger generation and I think that's going to pay dividends decades from now.

Hall: Also, by the way, this is a bank. The Fed says they are bank, so they're a bank, and they've proven very good at managing credit risk. Another thing I think that sometimes people say, well, they're old, stodgy, more-risky Visa. Why would I buy American Express when I can buy Visa and not have to worry about debt risk? I think it misses the point that American Express gets a larger share of all of the financial returns, and it manages that risk pretty well.