If You Had Invested $1000 into American Express When Warren Buffett First Invested in 1991, Here's How Much You'd Have Now

When it comes to investment legends, few names resonate as profoundly as Warren Buffett. The Oracle of Omaha's keen eye for value has transformed countless companies into gold mines for his conglomerate, Berkshire Hathaway (BRK.A)(BRK.B). One such company is American Express (AXP), a global leader in credit cards and financial services. If you had mirrored Buffett's significant investment in American Express back in August 1991 with just $1,000, today you'd be sitting on a small fortune of approximately $81,040.

As of today, American Express shares are trading at $273.69, marking a substantial increase over the past three decades. This impressive growth underscores not only the strength of American Express as a company but also the long-term vision that has become synonymous with Buffett's investment philosophy.

Buffett's Strategic Move in 1991

While it's true that Warren Buffett's relationship with American Express dates back to the 1960s, it was in August 1991 that he made his first large-scale investment in the company. During this period, Buffett purchased a significant stake valued at around $300 million. This move was a testament to his confidence in American Express's business model and future prospects.

For everyday investors, matching Buffett's investment might have seemed daunting. However, a modest investment of $1,000 at the same time would have reaped extraordinary returns. The substantial appreciation of American Express stock over the years demonstrates the power of long-term investing in quality companies.

The Salad Oil Scandal: A Lesson in Value Investing

Buffett's initial interest in American Express was piqued in the 1960s during the infamous "Salad Oil Scandal." In 1963, the company's lending practices were exploited by Anthony De Angelis, founder of Allied Crude Vegetable Oil Company. De Angelis used falsified inventories of salad oil as collateral to secure loans, including substantial sums from American Express.

When the fraud was uncovered, American Express faced significant financial and reputational damage. While many investors panicked, Buffett saw an opportunity. Recognizing the enduring value of the American Express brand, he acquired a small stake—about 5% of the company for roughly $20 million. This early investment laid the groundwork for his larger acquisition decades later.

Riding the Waves: American Express Through the Years

American Express has navigated various economic climates, from the credit card boom of the '70s and '80s to the challenges of the digital age. The company's ability to adapt and innovate has been a critical factor in its sustained growth.

In 2020, the COVID-19 pandemic posed unprecedented challenges. American Express shares plummeted to as low as $66 as global lockdowns and travel bans impacted consumer spending. Despite the downturn, Buffett maintained his position, a move that echoed his famous adage: "Be fearful when others are greedy, and greedy when others are fearful."

By 2022, American Express had not only recovered but reached new heights, with stock prices soaring to $196 per share. The company's resilience during the pandemic and strategic shifts, such as rebranding its Platinum Card and expanding digital services, have attracted a new generation of cardholders, particularly millennials and Gen Z consumers.

Today, Berkshire Hathaway holds 151,610,700 shares of American Express, accounting for approximately 20.29% of the company as of September 29, 2022. This significant stake underscores Buffett's enduring confidence in American Express.

Calculating the Returns

So, how does a $1,000 investment grow to over $81,000? This impressive return is the result of a combination of stock price appreciation and the compounding effect of reinvested dividends over 33 years. In August of 1991 when Buffett first invested, their share price was only $6.50. Today, the company is worth a staggering $273.90 meaning the 153 shares you would have purchased in 1991 would be worth $41,906 based on share appreciation alone.  

Investors who held onto their shares since 1991 have benefited immensely from the company's growth and strategic initiatives.

Conclusion

Warren Buffett's investment in American Express serves as a compelling case study in the merits of long-term investing and the importance of sticking with companies that have strong fundamentals and a durable competitive advantage.

For those who invested $1,000 alongside Buffett in 1991, the journey underscores a powerful lesson: patience and confidence in one's investment choices can yield extraordinary results. As American Express continues to evolve and expand its global footprint, investors may look back on this period as yet another chapter in the storied success of both American Express and Warren Buffett's investment prowess.

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On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.