Much of American Express’s money comes from the merchant fees it charges when consumers swipe their cards at sellers around the world. These fees are usually expressed as a percentage of the sweep amount, which means that as prices go up, the money American Express collects goes up as well. This gives it an incredible ability to organically track inflation over time.
The company is trading at around 20 times its earnings lagging behind, which is a bit of a discount from the S&P 500 as a whole. In addition, American Express is such a big player in the business travel market. ‘it’s about to do well as pandemic restrictions. ease and travel resume. This gives good reason to believe that its earnings growth could receive a one-time boost from this recovery.
While Buffett got big because of a short-term scandal, American Express’s long-term business model is probably the reason he has held his stock for so long. This model appears to be well placed to handle both inflation and the return of business travel. Add a relatively reasonable valuation to the mix, and it might be worth considering today.
N ° 3: Imagine going through the pandemic without his services
Buffett’s company owns 158 million shares of telecom giant Verizon (NYSE: VZ). Originally part of the Bell telephone system, Verizon became a major player in the breakup of this juggernaut. Now better known for its wireless and broadband services than its traditional landline phone service, the company has certainly evolved over time to keep up with changes in the industry.