Greg Abel Has 75% of Berkshire Hathaway's Portfolio Invested in Just 8 Stocks. Is the 1 That's Lagging Behind the S&P 500 the Best Buy Now?

American Express reported double-digit revenue and net-income growth for the first six months of 2026, with diluted EPS up 14%, and raised its full-year outlook to 10% revenue growth. However, Q2 expenses rose 12% year over year versus 10% revenue growth, while elevated rewards and marketing spending have pushed gross margin to its lowest level in a decade. Despite delivering less than 1% total return over the past year, the article views AXP's 19.7x trailing earnings valuation, 3% share-count reduction, and durable affluent-cardholder franchise as an attractive long-term entry point.

Analysis

AXP’s issue is not headline growth but the incremental economics of growth: acquisition bonuses, refreshed-product benefits and merchant-funded value propositions can pull forward spending while delaying recognition of whether cohorts earn back their upfront cost. The key variable is rewards-and-services expense as a percentage of billed business, not cardmember growth alone. If that ratio remains elevated after the Platinum refresh anniversary, the market is likely to treat AXP as a lower-quality issuer rather than a premium payments compounder, limiting multiple expansion despite buybacks.

Relative to V and MA, AXP carries both affluent discretionary-spend beta and credit-cost beta, but its closed-loop data and direct customer relationship create a potential upside asymmetry if new cohorts retain at high rates. V/MA should gain competitively if issuers broadly raise rewards to defend premium customers: network volumes are largely insulated from issuer reward expense, while higher interchange economics can support payment volumes. BAC is a secondary beneficiary only if consumer credit remains benign; it lacks AXP’s merchant-fee capture and is more exposed to funding and broader credit normalization.

The near-term catalyst is the next quarterly disclosure on rewards expense, marketing, receivables growth and delinquency/vintage trends. Over 1-3 months, evidence that spending growth persists while rewards intensity moderates would support a rerating; a deceleration in billed business alongside expense growth would expose operating deleverage. Over 6-18 months, a softer white-collar employment backdrop is the material tail risk because premium travel, dining and corporate spend have high operating leverage for AXP.

Contrarian view: the apparent valuation discount is not automatically a bargain; it may be correctly pricing a structurally more capital- and incentive-intensive model. The bullish case requires proof that elevated benefit spend is a finite cohort investment rather than the new competitive clearing price for affluent-card loyalty.

Key Decisions for Investors

• Maintain neutral AXP pending the next earnings release; upgrade only if rewards/services expense growth falls below revenue growth and billed-business growth remains high single digit or better. Falsifier for a constructive view: two consecutive quarters of expense-led margin compression or rising delinquency/vintage loss indicators.
• Express the cleaner payments-quality preference via long V / short AXP over the next 1-3 months, sized modestly. The pair wins if premium-card competition forces sustained reward inflation; stop out if AXP demonstrates clear operating leverage or materially outgrows V in billed business without a credit deterioration signal.
• For a directional AXP recovery trade, wait for post-earnings confirmation rather than buying ahead of results; use a 3-6 month call spread only after retention and reward-cost data validate payback. Risk/reward is unattractive without cohort-retention disclosure because margin normalization remains unverified.
• Monitor affluent-consumer proxies and corporate-spend indicators for early warning: weakening travel/entertainment volumes, rising charge-offs, or deterioration in professional-services employment should prompt reducing AXP exposure before consensus earnings revisions catch up.