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 half of 2026, with diluted EPS up 14% and the share count down 3% through buybacks; it also raised its full-year revenue-growth outlook to 10%. However, Q2 expenses rose 12% versus 10% revenue growth as cardmember rewards and marketing spending pressured margins, helping leave the stock's one-year total return below 1%. The article views the weakness as a potential buying opportunity at 19.7x trailing-12-month earnings, while flagging sensitivity to softer discretionary spending in an economic slowdown.

Analysis

AXP’s key debate is not topline growth but whether elevated acquisition and refresh spending converts into durable billings, fee retention, and receivable balances before the promotional cost is amortized. The relevant KPI is therefore spend and renewal behavior of recently acquired premium cohorts—not consolidated revenue growth. If cohort spend remains elevated while rewards expense normalizes over the next two quarters, incremental operating leverage and ongoing buybacks could drive a faster-than-expected EPS reacceleration.

The asymmetry versus V and MA is material in a consumer slowdown: AXP owns credit exposure and funds its rewards ecosystem, while the networks retain transaction economics with substantially less loss-reserve and funding sensitivity. A deterioration in affluent discretionary categories, rising 30+/90+ day delinquencies, or weaker SME spending would compress AXP’s earnings multiple before it materially affects V/MA volumes. Conversely, evidence that premium-card refreshes are producing high retention without escalating reward costs would undermine the bearish margin narrative.

Near term, this is likely an earnings-quality rather than a headline catalyst story; the next 1-3 months require monthly spending/category data and management commentary on renewal rates. Over 6-18 months, AXP’s ability to retain younger affluent cohorts can justify a premium to bank issuers, but not necessarily convergence with the structurally higher-margin network multiples. The consensus may be too focused on the visible rewards-cost step-up and insufficiently focused on whether it is a temporary customer-acquisition investment or a permanently lower take-rate.

Key Decisions for Investors

• Maintain AXP as a watch-list long rather than add immediately; initiate only if the next earnings release shows stable-to-improving operating margin, premium-card retention above management’s prior run-rate, and no upward revision to credit-loss provisions. Target a 6-12 month rerating from demonstrated operating leverage; exit if expense growth exceeds revenue growth for a second consecutive quarter.
• Use a 1-3 month defensive pair trade of long V or MA / short AXP if high-frequency consumer data weaken or AXP reports accelerating delinquency/reserve formation. The trade isolates issuer-credit and rewards-cost exposure from broad payments-volume risk; cover if AXP’s billed-business growth materially exceeds V/MA network-volume growth while loss metrics remain contained.
• For existing AXP exposure, hedge the next earnings event with a short-dated put spread rather than reducing the core position: the principal downside surprise is a combination of softer affluent travel/entertainment spend and incremental rewards investment, which can reset forward EPS estimates quickly.
• Monitor BAC and major card issuers’ charge-off and delinquency disclosures as a read-through. AXP’s premium customer mix may lag mass-market stress, but a broad rise in revolving-credit losses would challenge the premise that high-quality acquisition cohorts can offset elevated servicing costs.