American Express: A Solid Hand to Hold

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So, American Express. A curious thing, really. Last year, it rather decisively outperformed the market – a good 25% gain compared to the S&P 500’s respectable, but comparatively modest, 16%. Then, at the start of this year, a bit of a wobble. A dip, if you will. All because of a pronouncement from, well, let’s just say a rather assertive former occupant of the White House.

The idea was to cap credit card interest rates at 10%. A rather blunt instrument, if you ask me. And the market, predictably, got a bit skittish. It’s always fascinating, isn’t it, how easily these things spook investors? Like a herd of gazelles at the first sign of a leopard. I suspect it was an overreaction, frankly. A bit of a sale on a perfectly good stock, and as a trader, that always gets my attention.

Berkshire Hathaway’s Long Game

It’s no accident that Warren Buffett’s Berkshire Hathaway has held American Express for decades. The man likes a good moat – a defensible position, if you will. And he’s remarkably good at spotting companies that consistently deliver high margins and growth. It’s like he has a sixth sense for these things. Or perhaps just a really good team of analysts. Either way, it’s impressive.

Amex ticks all the boxes. The Centurion Card – the Black Card, as it’s known – remains a status symbol, even in an age where everyone seems to have a piece of plastic. Coupled with the Membership Rewards program, it creates a surprisingly strong moat in a crowded market. It’s not enough to just offer credit; you have to offer an experience. And Amex seems to understand that.

What also sets Amex apart is that it’s a “closed loop” system. They’re both the issuer and the processor of transactions. Mastercard and Visa are just the processors. It’s a subtle difference, but it gives Amex more control – and, potentially, more profit. Though it also makes them a bit more vulnerable to, shall we say, regulatory whims.

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The Empty Threat?

Now, about that 10% cap. The initial announcement suggested it would be in effect within days. January 20th, if memory serves. It didn’t happen, of course. And it’s worth remembering that a presidential pronouncement isn’t the same as a law. Congress is the one with the power to actually change things. And they’ve been, shall we say, occupied with other matters.

A bill has been proposed, co-sponsored by senators from both sides of the aisle. The “10% Credit Card Interest Rate Cap Act.” But it faces significant resistance, both from congressional leaders and from the financial industry, which is understandably less than thrilled. Lobbying, you see, is a powerful force.

Meanwhile, Amex continues to deliver impressive numbers. Fourth-quarter earnings revealed a 10% increase in net revenue (nearly $19 billion) and a 13% surge in net income (almost $2.5 billion). It’s a testament to their ability to attract and retain customers, even in a competitive market. People clearly like their cards, and they keep using them.

So, where does that leave us? I’d say snapping up the stock at the current price is a sensible move for investors. It’s a solid company with a strong brand and a proven track record. American Express is, in my view, a buy. And as a trader, I always appreciate a good opportunity.

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2026-02-05 22:33