Warren Buffett Bullish on AXP Stock
American Express Company (NYSE:AXP) timidly gained about one percent last week, going as high as $59.80 on Friday on Wall Street. American Express stock has made the gains despite potentially harmful rumors surrounding the credit card specialist company. Fox Business News said that American Express (“AMEX” to its friends) wants to oust embattled CEO Ken Chenault amid festering relations with the company’s board of directors. (Source: “American Express CEO Chenault On Thin Ice, Company Possibly in Play,” Fox Business News, March 6, 2016.)
Therein lies the opportunity factor. AMEX stock’s timid but steady rise as the buzz over Chenault’s imminent departure intensifies offers a glimpse of its potential. Pundits are speculating that American Express could try to replace Chenault.
However, the American Express board may go one step further and sidestep the succession issue altogether. The board may seek an outside buyer. This would resolve the executive succession problem and give AXP stock, which lost some 27% over the past 12 months, a bolder push. (Source: Ibid.) The rumors suggest that Wells Fargo is one of the companies on the short list for a takeover, even if the U.S. bank has denied it. (Source: Ibid.)
News of the acquisition plans has certainly generated optimism over American Express. The intensity of Chenault’s struggle with the board should help supply more fuel until the rumors are settled.
Warren Buffett and his Berkshire Hathaway (NYSE:BRK.A) are fans of financial services companies like American Express. Indeed, Buffett has a liking for American Express stock itself. The billionaire investor has added it to the top of his 2016 picks. Berkshire Hathaway now owns some 151.6 million shares, or $10.5 billion, in American Express shares. (Source: “Key Changes in Warren Buffett and Berkshire Hathaway Stock Holdings,” 24/7 Wall Street, August 15, 2015; http://247wallst.com/investing/2015/08/14/key-changes-in-warren-buffett-and-berkshire-hathaway-stock-holdings/.)
Evidently, Buffett has bullish expectations for AXP stock. Buffett is AMEX’s biggest single shareholder; he owns some 15% of the company. (Source: “Warren Buffett will decide when it’s time for changes at American Express,” Business Insider, January 22, 2016.)
The Buffett connection becomes more interesting considering that Berkshire Hathaway is also a major investor in Wells Fargo & Co. (NYSE:WFC). Wells Fargo is another of Buffett’s top picks for 2016. The San Francisco, California-based group is the fourth-largest U.S. bank by assets. Although WFC stock has spent more time in the red than the black this year, Buffett has invested up to $26.1 billion, or approximately 479.7 million shares, in Wells Fargo. (Source: “Key Changes in Warren Buffett and Berkshire Hathaway Stock Holdings,” 24/7 Wall Street, August 15, 2015.)
Given the links between Buffett, Wells Fargo, and American Express, the rumors of a takeover are more likely true than not, making AXP stock a potentially bullish investment opportunity. As with any investment, though, due diligence is key.