Warren Buffett has said time and time again to never bet against America. Investors who buy and hold American stocks have seen miraculous gains in wealth over the last century, due to the economic dominance of the country that now has a gross domestic product (GDP) of $30 trillion.
It is no surprise then to see Buffett focus on American stocks in his investment portfolio over at Berkshire Hathaway (BRK.B 0.59%) (BRK.A 0.50%). Here are two blue chip American stocks that make up 27.3% of Berkshire Hathaway's stock portfolio today.
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A long-standing premium credit card franchise
Close to 17% of Buffett's portfolio is invested in American Express (AXP 0.34%), which Berkshire has owned since 1991. The company dominates the premium credit card industry, with a focus on catering to travel, dining, and entertainment spending. It has built up a strong brand over the decades, with customers willing to pay high fees to have access to the American Express credit card network.
The company now has 147.5 million credit cards in circulation and is adding over 3 million net new card additions to its network quarterly. After a period of stagnation in the early 21st century, American Express' new leadership team has reinvigorated the brand by catering to younger consumers with features like annual ride sharing credits on Uber. These younger consumers grew spending at 14% year over year last quarter through American Express cards compared to 7% for the overall business, which directly translates into revenue.
NYSE: AXP
Key Data Points
These customers have high lifetime values as they will stick around with American Express for many years. Earnings per share (EPS) is up 159% in the last 10 years, with an acceleration in growth coming out of the COVID-19 pandemic. Buffett likes American Express as well because of its capital returns program, which includes buybacks and dividends. Buybacks have reduced American Express shares outstanding by 30% cumulatively in the last 10 years.
Add it all up, and you can see why American Express is one of Buffett's largest holdings and looks to be a permanent position in the Berkshire Hathaway universe.
BAC Shares Outstanding data by YCharts
A durable banking giant
Another Buffett stock that literally has "America" in the name is Bank of America (BAC +0.04%). It is Buffett's third-largest stock position (the first is Apple). He first bought shares in 2011 after the Great Recession and banking crisis when shares were cheap.
Bank of America has been a mainstay of the U.S. banking system for over a century. It has nearly $3.4 trillion in total assets spread across consumer banking, wealth management, and global investment banking. If there is a legal financial service to be provided, you can bet that Bank of America does it. This is why it has 40 million mobile banking users, people who have stuck around with the banking giant for many years.
Buffett loves investing in franchises that have long customer relationships, which describes a consumer banking giant like Bank of America perfectly.
NYSE: BAC
Key Data Points
Coming out of the great financial crisis, Bank of America has seen its earnings grow substantially. Net income is up close to 2,000% since 2011 when Buffett purchased. Like American Express, Bank of America has reduced its shares outstanding by around 30% in the last 10 years, which juiced shareholder returns.
Today, you can buy Bank of America at a reasonable price-to-earnings (P/E) ratio of just under 15. This makes it a great blue chip stock you can buy alongside Buffett for your investing portfolio.
