Berkshire Hathaway, the conglomerate headed by Warren Buffett, has its hands in numerous industries. But it also has a huge public equities portfolio, valued at roughly $350 billion. By looking at what the legendary investor owns, the average investor immediately has a valuable source of new stock ideas to consider. 

But of the dozens of stocks Buffett owns, there's one you might want to take a closer look at right now. Top financial enterprise American Express (AXP -0.62%) is the third-largest holding, as Berkshire owns 20% of the outstanding shares. It has a unique business model that has its advantages. 

So, is this top Buffett holding a no-brainer stock for your portfolio? 

AmEx's attractive qualities 

Investors are familiar with traditional banks such as JPMorgan Chase, Bank of America, and Capital One. While they have sprawling businesses that span many different lending products, a key part of their operations is the issuing of credit cards. They approve borrowers and handle the servicing of these loans, collecting interest on outstanding balances. And any time one of these cards gets swiped, the banks also collect interchange fees from merchants. 

Investors are also probably familiar with the giant card networks, especially Visa and Mastercard. They don't issue their own branded cards, but they operate the communications network that connects all the parties of a transaction, collecting tiny assessment fees based on the spending occurring on their platforms. 

With that in mind, it's worth looking at how American Express is a unique operation. It's both a card issuer, like JPMorgan Chase, and a card network, like Visa. This business model allows it to capture a greater portion of the economics any time one of its credit cards gets used. In other words, it's a closed-loop payments system. 

This business model has worked so well primarily because of who AmEx customers are. They tend to be much more affluent than the typical consumer, willing to shell out hundreds of dollars in annual fees to have access to the perks and rewards of being a cardholder. 

AmEx's brand is strong and held in high regard around the world. There's a special aura around being able to pull out your American Express credit card when paying for things. The brand strength has probably been a big factor in Buffett's decision to remain a sizable shareholder. 

The company is registering stellar growth right now. Net interest income in the first three months of 2023 was up 36%. Network volume increased 14%, with international card services showing particular strength at 29% year-over-year growth. That's not a surprise, given that AmEx cardholders have greater discretionary spending power. Moreover, travel demand was strong at the start of this year. 

Management appears optimistic, guiding for 16% revenue growth and a 14% increase in diluted earnings per share in 2023, both figures at the midpoint. Should macro conditions not deteriorate, executives see double-digit top- and bottom-line gains in 2024 as well. 

AmEx's valuation 

In the past three years, shares of American Express have jumped 69%, beating out the S&P 500, as well as both Visa and Mastercard. The business has shown its resilience during major events such as the pandemic, inflationary pressures, and a highly uncertain economic environment today. That can give shareholders a vote of confidence that the company can successfully navigate any challenges it faces. 

The stock currently trades at a price-to-earnings (P/E) multiple of 17.7. By itself, this metric doesn't tell you anything. But by zooming out, we can gain some valuable insights. That P/E ratio is lower than the average valuation that AmEx shares have sold for over the past three-, five-, and 10-year periods.  

For a top Buffett stock, this looks like a reasonable price to pay.