The Best Warren Buffett Stock to Buy With $100 Right Now

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American Express — a top Berkshire Hathaway portfolio holding — is an extremely high-quality company.

Thanks to his remarkable track record leading Berkshire Hathaway over the decades, Warren Buffett has become a legend in the financial world. It’s no wonder that individual investors pay close attention to his moves to find potential ideas for their own portfolios.

The conglomerate’s massive $367 billion equity portfolio now includes stakes in dozens of businesses. But I think one holding of the Oracle of Omaha in particular should be on your radar right now: American Express (AXP 0.07%).

Strong fundamental performance

Many people believe we are in uncertain economic times. Interest rates are high. Inflation, while much lower than its recent peaks, appears stuck at levels above the Federal Reserve’s target range of 2%. And there are a lot of questions about whether the U.S. will enter a recession sometime soon.

Forget about the macro situation. American Express continues to do well regardless of what the backdrop looks like.

The credit card giant processed $419 billion in payment volume in the first three months of 2024. Boosted by robust cross-border activity, that figure was up 5% year over year. Because Amex earns more fees the more that its cards are used, higher payment volume is a key trend that drives business success.

This helped increase revenue by 11% in Q1. Management has forecast that the top line will grow by 10% (at the midpoint of its projection range) for the full year. American Express has no issues when it comes to profitability. Diluted earnings per share were $3.33 in the first quarter, up from $2.40 in the year-ago period.

These headline metrics indicate a company that’s firing on all cylinders today.

Competitive strengths

American Express’s strong financial results are nothing new. In fact, the business’s lasting success is supported by what I believe are its two most important competitive strengths.

The first is Amex’s powerful brand, which is arguably one of the most recognized in the world — not only in the financial services sector, but in general. Part of that comes from being around for nearly two centuries. It also doesn’t hurt that American Express presents itself as a premium brand and targets higher-income consumers.

American Express operates its own payments system. Therefore, it also benefits from network effects. As more merchants plug into the platform, being an Amex cardholder becomes more valuable to consumers because they have more places where they can use their cards. And as the number of cardholders grows, merchants have greater incentives to accept Amex as a method of payment.

When trying to find high-quality stocks to buy and hold for the long term, investors should look for companies that possess economic moats — inherent advantages that allow them to defend against competition. Buffett certainly does. I believe Amex’s brand and the network effects that the business benefits from are two top factors that he appreciates about Amex, and help explain why Berkshire Hathaway owns a whopping 21% of its shares outstanding.

Looking at the valuation

Anyone who takes the time to analyze American Express will likely come away impressed. The company has a long and successful history. Even so, its stock looks reasonably valued right now, trading at a price-to-earnings ratio of about 20. While that’s slightly above its trailing five- and 10-year averages, the shares are still cheaper than the 27 average for the S&P 500 — even though it’s easy to argue that American Express is an above-average company.

If you have $100 to invest now, this business should be on your radar. It’s the best Buffett stock to buy.

American Express is an advertising partner of The Ascent, a Motley Fool company. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.