Greg Abel’s Berkshire Portfolio Tilts Heavily to Five Names, With American Express the Standout Pick

Key Points

• American Express stands out in Berkshire Hathaway’s concentrated portfolio because of its premium customer base.

• The company is attracting younger affluent consumers, with millennials and Gen Z now making up most new accounts.

• While the stock isn’t cheap, Amex’s strong moat, pricing power, and loyal customers make it a compelling investment.

Warren Buffett spent decades arguing that a small number of exceptional businesses outperforms a broad basket of mediocre ones, and his successor is running the same playbook. Under new CEO Greg Abel, Berkshire Hathaway has reduced its equity portfolio to a narrower set of names, with roughly 68% of its value now concentrated in just five companies.

Those five are Apple, American Express (NYSE:AXP), Coca-Cola, Bank of America and Chevron. Each is a high-quality business, but one stands out above the rest in my view.

Image source: Getty Images.

Concentration is the point, not a flaw

Before turning to my pick, it is worth appreciating why Berkshire places such large bets on so few stocks. Abel has trimmed the portfolio to fewer than 30 holdings and emphasized a short list of core positions, each possessing a wide competitive moat and durable earnings. To a newer investor, committing most capital to five stocks may appear reckless.

To Buffett and Abel, spreading money thinly across dozens of average businesses is the greater risk. They prefer to own a great deal of a few companies they understand deeply. That philosophy explains why the top names in this portfolio deserve close study.

My favorite of the bunch: American Express

Apple is the largest holding, but American Express is the one I would gladly own. What sets it apart is that it is not a conventional credit card company. It operates a closed-loop network, issuing cards, processing payments, and serving merchants simultaneously, allowing it to earn a fee on nearly every dollar its customers spend. This fee-based, spend-driven model is far steadier than that of a typical lender dependent on interest income and loan performance.

Equally important is who is spending. American Express serves affluent, loyal customers and has aggressively courted the next generation. Its recent Platinum card revamp—the largest in its history—proved popular, and the company added millions of new cards, most on fee-based products.

Most notably, millennials and Gen Z now represent about 65% of its new global consumer accounts and a rising share of total spending. The strategy is patient and smart: win young, high-earning customers early with tailored perks such as dining reservations through Resy and Tock and a quarterly credit at Lululemon Athletica, then grow alongside them as incomes and needs expand over decades.

Why the moat is so hard to attack

The strength of this model is its compounding effect. Premium customers spend more, enhancing the value of Amex’s network to merchants, which funds richer rewards and attracts more premium users. Because these cardholders pay annual fees and tend to spend rather than carry risky balances, Amex generates reliable, high-quality revenue with less credit risk than many banks. That self-reinforcing advantage is exactly what Buffett valued, and it is why Berkshire has held American Express for over three decades. It is a business built to raise prices while retaining satisfied customers—a rare combination.

No stock is without risk. American Express is exposed to consumer spending, so a sharp recession would slow growth and could lift loan losses even among wealthier clients. It also faces steady competition from other networks and fintech challengers targeting the same young spenders. After a strong run, the shares are no longer cheap, so patient investors may prefer to accumulate gradually.

Greg Abel’s concentrated Berkshire portfolio is a master class in quality over quantity, and American Express captures what makes these businesses special: a wide moat, pricing power, and a loyal base that is getting younger. Of the five stocks dominating Berkshire’s holdings, it is my favorite.

Source link