Has Greg Abel Made His Initial Major Misstep as CEO of Berkshire Hathaway?

Berkshire Hathaway and American Express: Key Developments

American Express (NYSE: AXP) remains a significant holding for Berkshire Hathaway (NYSE: BRKA, BRKB), especially under the leadership of CEO Greg Abel, who took over on January 1, 2023. Berkshire’s stake has increased to approximately 24% of the company, valued at $49.2 billion, largely due to stock buybacks rather than new purchases. Despite American Express underperforming rivals Visa and Mastercard year-to-date, it continues to show solid fundamentals, generating record revenues and forecasting 10% year-over-year growth through 2026.

As part of a broader portfolio strategy, Berkshire has reduced its positions in various financial stocks but maintained its confidence in American Express, viewing it as a long-term compounder. Abel emphasized his belief in American Express’s management and business model, indicating that minimal activity is expected in key holdings like American Express and Coca-Cola unless fundamentals shift. Currently, American Express’s price-to-earnings (P/E) ratio stands at 19.6, with a forward P/E of 16.3, significantly lower than its peers.