Core Viewpoint - American Express is highlighted as a strong investment within Berkshire Hathaway's portfolio, showcasing consistent earnings growth and a robust business model that aligns with Warren Buffett's investment philosophy [2][4][12]. Company Overview - American Express is Berkshire Hathaway's second-largest equity holding, valued at approximately $50 billion, accounting for nearly 20% of its equity portfolio [5]. - The company operates as a global payments provider, issuing cards and managing its own network, which allows it to gather valuable consumer spending data [6]. Financial Performance - In 2024, American Express reported a revenue increase of 9% year-over-year to $65.9 billion, with earnings per share rising 25% to $14.01 [7]. - The company returned $7.9 billion to shareholders through share repurchases and dividends during the same year [7]. - Recent quarters indicate continued momentum, with second-quarter revenue growth of 9% and earnings per share growth of 17%, while third-quarter revenue growth accelerated to 11% [8]. Market Position and Strategy - The successful refresh of the Platinum card has significantly boosted customer engagement, with new account acquisitions doubling compared to pre-refresh levels [9][10]. - American Express commands a premium annual fee of $895 for its Platinum card, reflecting its strong pricing power and the value it provides to members [10]. Valuation Metrics - American Express has a price-to-earnings ratio of 24, which is lower than that of Apple (36) and Alphabet (30), making it relatively attractive among Buffett's investments [11][12]. - Despite not being cheap compared to traditional financial stocks, the valuation appears reasonable given the company's consistent double-digit revenue growth and strong capital returns [12].

Core Insights - American Express has announced significant upgrades to its U.S. Platinum cards, adding new perks valued at over $3,500 annually while increasing the annual fee by $200 to $895 [1][3]. Summary by Categories Perks and Benefits - The updated perks include dining credits via Resy, shopping credits at Lululemon, and Uber One memberships, along with enhanced hotel and entertainment benefits [2]. - Platinum Business cardholders will receive new credits for Dell and Adobe purchases, a $600 hotel credit, and up to $3,600 in additional statement credits for top spenders [2]. Financial Implications - The increase in annual fee to $895 is expected to provide a long-term boost to American Express's financial results [3]. - The company believes that the value provided through the new perks significantly exceeds the annual fee, enhancing customer satisfaction and retention [3]. Target Demographics - The card refresh aligns with American Express's strategy to target affluent customers, particularly Millennials and Gen Z, who are comfortable with credit card fees and view them as subscription-like products [5][6]. - Millennials and Gen Z account for 35% of all U.S. consumer spending for American Express, a significant increase from 19% in 2019 [7]. Spending Trends - Since the launch of Resy benefits, Amex cardholders have increased their spending at participating U.S. restaurants by 25%, making them attractive to restaurant partners [4]. - The trend indicates a strong willingness among customers to pay for premium card benefits, as evidenced by record increases in card fees reported in Q2 earnings [7].

Competitive Landscape - The Strata Elite card, with a $595 annual fee, will compete with the Chase Sapphire Reserve and American Express Platinum cards [1]

Core Viewpoint - American Express is proactively betting on continued consumer spending despite economic uncertainties, showcasing resilience in its customer base and strong financial performance [1][2]. Financial Performance - American Express reported record revenue of $17.9 billion, a 9% increase year-over-year, driven by fee income from premium cards and higher net interest revenue [5]. - Net income decreased by 4% to $2.9 billion as the company invested in technology and risk management systems [5]. - Cardmember spending reached a quarterly record, up 7% from the previous year, excluding currency fluctuations [7]. Consumer Behavior - Spending on discretionary categories like airlines and lodging was softer, while purchases in restaurants and everyday goods remained stable [3]. - Millennials and GenZ cardholders increased their spending by 10% and nearly 40%, respectively, indicating a shift towards premium annual-fee products [7]. Risk Factors - The company is monitoring potential impacts from announced or future tariff increases, which could affect cardmember confidence and lead to higher everyday prices [4]. - Despite no significant impact in Q2 results, there is caution regarding how rising import costs may affect small business customers [4]. Strategic Initiatives - American Express is set to refresh its Platinum card this fall, enhancing travel and lifestyle benefits while adjusting fees only at renewal [8]. - The company has partnered with Coinbase to launch a new CoinbaseOne card, allowing rewards in digital assets and positioning itself in the crypto space [8]. International Growth - The company continues to experience double-digit growth outside the United States, with management noting millions of new merchant locations and higher premium annual fees compared to domestic offerings [9].