The top stock in Berkshire Hathaway's (BRK.A 0.88%) (BRK.B 0.55%) equity portfolio remained Apple (AAPL -0.20%) at the end of the third quarter. But the Oracle of Omaha was selling huge chunks of this position throughout 2024, and it's possible this continued into the fourth quarter. So, what is Berkshire's biggest bet if you exclude the stocks Berkshire has been selling recently? American Express (AXP 1.80%). The integrated payments company, which operates as both a bank and a credit card specialist, is Berkshire's biggest holding after Apple -- and the famed investor hasn't sold a single share.
With Berkshire relentlessly holding on to its American Express shares despite them soaring higher last year, it looks like Buffett may believe the stock could rise even more. Should investors buy shares, copying Berkshire's bet on American Express as the Buffett-led conglomerate tenaciously holds on to its large position in the financial stock? Or did investors who failed to buy and hold the stock last year miss the boat? After all, shares rose 58% in 2024.
A powerful growth story
Thanks to its unique business model, American Express has been able to grow earnings at a spectacularly high rate recently, even as revenue growth has slowed. On 9% revenue growth, the powerhouse payments and banking company's earnings per share rose 28% year over year in the trailing-nine-month period ended Sept. 30, 2024.
Such robust earnings growth has been fueled by strong credit and operating leverage. In fact, management had to raise its guidance for full-year earnings per share (EPS) when it reported third-quarter results. Previously, management was guiding for EPS for the period to be between $13.30 and $13.80, but now management expects it to be between $13.75 and $14.05.
Additionally, though American Express's trailing-nine-month revenue growth rate of 9% is lower than the 14% growth the company achieved for the full year of 2023, it's worth emphasizing why robust single-digit growth looks sustainable for the foreseeable future: The company benefits from different growth levers simultaneously.
Consider that American Express's 8% year-over-year top-line growth in the third quarter of 2024 was helped by 6% growth in card member spending, 18% growth in card fee revenue growth (an accelerated rate from Q2), and a 17% increase in net interest income as the company's lending operation continues to gain traction with its customers. This triple-threat growth story increases the odds of strong revenue growth rates for the foreseeable future, as one leg of the stool can pick up the slack for another during shifting economic environments.
The stock's valuation remains attractive
So, is American Express stock worth buying today? The underlying business is certainly doing great. But is the stock price good, making shares worth considering buying now? I believe so. The stock's price-to-earnings ratio is 22, and its forward P/E is only 20. Not only is American Express' price-to-earnings ratio meaningfully below the S&P 500 index's ratio of about 25 at the time of this writing, but its strong business momentum suggests the integrated payments company can easily live up to its current valuation.
Of course, investors should keep in mind that no investment is without risk. Further, there's no guarantee that the stock's current price is the best entry point investors will see in 2025. But at its current price, American Express shares do look like an attractive long-term investment as part of a diversified portfolio.
