Meet the Dividend Growth Stock That Warren Buffett Held for Decades, and Greg Abel Pegged as One of Berkshire Hathaway's Multidecade Compounders
American Express fell 11.8% YTD after a post-earnings sell-off, but Berkshire Hathaway's Greg Abel has called it a core holding. The article argues AXP remains a no-brainer value stock at 18.5x 2026 earnings.
Intelligence analysis by Llama
Berkshire Hathaway's new CEO Greg Abel has reaffirmed American Express as a core holding expected to compound for decades, even as AXP slid 11.8% year to date following its Q2 2026 earnings report. The Motley Fool frames the dip as overblown given raised guidance and a 9% jump in card-member spending.
Imagine a club where rich people pay a fee to use a special credit card that gives them fancy rewards, and stores happily pay the card company to accept it. That company is American Express, and it's so good at making money that the new boss of Warren Buffett's company says it's a star pick, even after its stock dipped.
Analysis
A Reaffirmed Bet From the New Boss at Berkshire
Greg Abel's first day as CEO of Berkshire Hathaway on Jan. 1, 2026, was marked by an aggressive reshuffling of the conglomerate's equity portfolio, including sales of small positions and the elevation of Alphabet to a top-five holding on Warren Buffett's recommendation. Yet amid the churn, Abel publicly committed to keeping American Express, Apple, Coca-Cola, and Moody's as concentrated core positions, calling them multidecade compounders. The Motley Fool highlights that explicit endorsement as the framing device for its buy thesis on AXP, leaning on the imprimatur of Berkshire's incoming leadership to argue the stock is misunderstood by the market.
The Sell-Off Looks Disconnected From the Fundamentals
American Express dropped 4.3% on July 24 after releasing its Q2 2026 results, dragging the year-to-date return down to negative 11.8%. The article contends the reaction was overblown: revenue narrowly missed expectations, but management raised full-year 2026 revenue guidance to 10% growth, and foreign-exchange-adjusted card-member spending climbed 9%, the strongest pace in three years. Full-year EPS guidance of $17.30 to $17.90 would set an all-time high, and American Express continues to buy back stock at a pace that has shrunk the share count by more than 25% over the past decade, mechanically boosting per-share earnings even as the share price has quintupled.
A Moat Built on Affluent, Fee-Tolerant Cardholders
The investment case rests on American Express's distinctive business model, in which a wealthy, rewards-driven customer base generates merchant fees that dwarf the cost of those rewards. The article notes that in the first six months of 2026, Amex collected about $5.61 billion in net card fees against $9.94 billion in rewards expenses, but merchant fees alone were roughly double the rewards bill. That asymmetry — customers pay high annual fees for perks that nearly double their value, merchants pay interchange for sales they would not otherwise capture, and shareholders collect steadily growing earnings — is what the piece describes as a "textbook Warren Buffett stock." Trading at 18.5 times the midpoint of 2026 earnings estimates, the valuation leaves room for the dividend, which has roughly tripled over the past decade, to keep growing alongside buybacks.
Key points
- Greg Abel has named American Express as a core Berkshire holding expected to compound for decades, alongside Apple, Coca-Cola, and Moody's.
- AXP fell 4.3% on July 24 after Q2 2026 earnings and is down 11.8% year to date, but the article argues the sell-off is overblown.
- Management raised full-year 2026 revenue growth guidance to 10% and is guiding for record EPS of $17.30 to $17.90.
- Foreign-exchange-adjusted card-member spending grew 9% in Q2, the strongest pace in three years.
- The stock trades at 18.5x the midpoint of 2026 earnings, has tripled its dividend over the past decade, and shrunk its share count by more than 25%.
If American Express continues to grow card-member spending near 9% and executes on its raised revenue guidance, EPS could reach the upper end of the $17.90 range, driving further dividend increases and buyback-driven per-share growth. Continued endorsement from Berkshire's leadership under Greg Abel could also serve as a long-term floor on the multiple, supporting a re-rating as the macro environment stabilizes.
A more pronounced slowdown in discretionary spending among affluent consumers, or a sharper-than-expected rise in expenses tied to the revamped U.S. Platinum Card perks, could compress margins and undermine the raised guidance. The stock's 11.8% YTD decline also suggests the market is sensitive to any sign of consumer weakness, leaving limited margin for execution missteps.
