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September 7, 2024

Unpacking American Express: A Deep Dive into Market Position and Financial Resilience

In each episode, we take a closer look at a different company, exploring its sources of power, market evolution, competitive landscape, and financial strength. In this inaugural episode, we're diving into American Express, one of the oldest investments in the Berkshire Hathaway portfolio. American Express, founded in 1850, has transformed from an express shipping business into a global financial services powerhouse. We trace its history from the introduction of traveler’s checks and its first credit card to its current suite of services including credit and debit cards, merchant services, and travel and lifestyle services. We analyze American Express' competitive positioning against giants like Visa and Mastercard, examining their unique business model that includes issuing cards and extending credit. We also discuss their regulatory environment, customer base, and recent performance metrics. The episode delves into American Express' profitability, exploring their revenue sources, including discount revenue and net interest income, and their strategic focus on premium customers. We also discuss their balance sheet, funding sources, and the stickiness of their deposits compared to other banks. Finally, we evaluate the brand's resilience and management's strategic moves, including substantial stock repurchases and dividend payouts. Despite intense competition and regulatory changes, American Express continues to demonstrate strong financial health and market positioning. Join me as we uncover the intricate details of American Express and what makes it a formidable player in the financial services industry. Let us know what you think of this episode through the link below. Thank you for listening, and see you next month!