Berkshire Hathaway's Future Amid Managerial Transitions: Does American Express Still Reflect Buffett's Principles?

The transition of power at Berkshire Hathaway has investors on edge, but one question looms large: Will Greg Abel and his team uphold Warren Buffett's investment principles, particularly regarding cornerstone holdings like American Express? With Buffett stepping down in 2026, the spotlight turns to whether Amex-Berkshire's second-largest stake at 18.8% ownership-still embodies the "economic moat" and long-term value Buffett once championed.

American Express: A Buffett Staple, But Is It Still a Buy?

American Express has delivered robust financial performance in 2025, with Q3 revenue surging 11% year-over-year to $18.4 billion and earnings per share (EPS) rising 19% to $4.14. Its Return on Equity (ROE) hit an impressive 36% in the quarter, a testament to its premium pricing power and efficient capital allocation. However, free cash flow has been volatile, dropping 28.58% in 2024 to $12.139 billion before rebounding to $4.334 billion in Q3 2025. This inconsistency raises questions about its ability to sustain Buffett's preferred "strong balance sheet" criteria.

Despite these fluctuations, Amex's strategic initiatives align with Buffett's emphasis on durable competitive advantages. The company is doubling down on international expansion, with a 50% increase in global spend over three years, and investing in digital transformation, including virtual card payments and B2B solutions like its recent acquisition of Senner. These moves cater to evolving consumer and business needs, particularly among younger demographics, who now account for 60% of new accounts.

Valuation Concerns and Buffett's Enduring Faith

Critics argue Amex's stock is overvalued, trading at $362.28-above its calculated fair value of $351.87. Yet Buffett has long viewed Amex as a "Good Housekeeping seal of approval" according to reports, valuing its dual business model as both a payments network and a lending institution. This duality provides stability during economic downturns, a trait Buffett prizes. Berkshire's decision to maintain its 18.8% stake in Q3 2025 suggests continued confidence, even as the stock trades at a premium.

Greg Abel, Berkshire's incoming CEO, has signaled continuity in investment strategy, emphasizing long-term value and economic moats. While his background is operational rather than purely investment-focused, his recent trades-such as increasing positions in Chevron and UnitedHealth Group-reflect a disciplined approach to capital deployment. This aligns with Buffett's principles, though investors will need to monitor whether Abel prioritizes growth stocks or sticks to value-centric bets.

Strategic Alignment and Leadership Continuity

Berkshire's leadership reshuffle, including the departure of Todd Combs and the promotion of Charles Chang as CFO, underscores a focus on internal alignment. Abel's public statements affirm his commitment to Buffett's philosophy, particularly in retaining high-quality, cash-flow-rich companies like Amex. Meanwhile, Amex's 8% to 10% revenue growth guidance for 2025 and its focus on fraud prevention position it to weather macroeconomic headwinds-a key Buffett criterion.

However, the stock's valuation premium demands scrutiny. If interest rates stabilize and consumer spending remains resilient, Amex's premium pricing and brand loyalty could justify the current price. Conversely, a prolonged economic slowdown might expose its vulnerabilities, particularly in the premium credit card segment.

Conclusion: A Buffett Legacy, But With Caveats

American Express remains a cornerstone of Berkshire's portfolio, reflecting Buffett's affinity for companies with strong brand equity and recurring revenue streams. Its strategic initiatives and financial resilience align with his principles, though its valuation requires careful monitoring. As Greg Abel assumes the reins, investors should watch for signals that the new leadership prioritizes long-term value over short-term gains-a hallmark of Buffett's legacy. For now, Amex appears to hold its place as a "buy and hold" stock, but the market's appetite for future growth will ultimately determine its success under Berkshire's new era.