Warren Buffett's Investment in American Express Stock Turned Into a 40-Bagger Success. Here's the Secret Behind It

American Express is highlighted as a long-term winner driven by per-share earnings growth, with share repurchases lifting Buffett’s ownership from 10% to 22% by 2025. Berkshire’s investment cost is cited at about $1.3B versus $1.4B in 1995, while it collected $479M in dividends in 2025. The article is constructive on AXP’s ongoing cash generation and buyback-supported EPS growth, but it is mostly an investment commentary rather than new company-specific news.

Analysis

The real signal here is not “buybacks are good,” but that elite capital return policies create a compounding lever on per-share earnings that most valuation models underweight. For high-ROE financials, a steady shrink in share count can add a low-double-digit tailwind to EPS even when topline growth slows to mid-single digits, which helps explain why mature compounders can keep re-rating despite looking “fully valued” on headline growth. This is especially relevant in a market where investors are paying up for durable buyback capacity and punishing firms that rely on M&A or balance-sheet expansion to manufacture growth.

The second-order winner is Berkshire’s style of ownership: companies that retire stock become quasi-capital allocators for long-duration holders, effectively transferring excess cash into a larger claim on future profits. That matters because it reduces the need for active capital deployment and lowers the hurdle rate for holding periods measured in years, not quarters. The market usually misprices this by focusing on current EPS yield instead of the cumulative ownership accretion embedded in persistent repurchase programs.

Contrarian angle: the consensus is likely too comfortable assuming buybacks always create value. They only work when repurchases are funded from structurally excess cash and done at reasonable multiples; if credit spreads widen or consumer spending weakens, financials with aggressive capital return can abruptly slow repurchases and lose the EPS support that investors have been paying for. The key watch item over the next 6-12 months is whether capital return remains discretionary and countercyclical, or becomes procyclical and forced.

Key Decisions for Investors

• Long AXP vs. short a basket of low-buyback, low-ROE financials for 6-12 months; the thesis is that per-share growth should keep compounding even if revenue growth normalizes, with downside protection from AXP’s cash generation.
• Add BRK.B on any 3-5% pullback as a long-duration compounder proxy; the risk/reward is attractive if the market continues rewarding capital allocators that benefit from embedded buyback yield across holdings.
• Avoid chasing high nominal growth names with heavy dilution; prefer names where EPS growth is at least 200-300 bps above revenue growth due to repurchases, especially in financials and mature consumer franchises.
• Use a covered-call structure on AXP into the next 1-2 quarters if the stock rerates toward the upper end of its historical multiple band; the thesis is durable but upside may be more time-driven than catalyst-driven.
• Monitor any sign of buyback slowdown or CET1 pressure in AXP/financial peers; if capital return cadence breaks, reduce exposure quickly because the market is likely to compress the premium within 1-2 reporting cycles.