More on AMEX: Best of Breed in a Triopoly

An erudite explanation by James Cullen here.

I also want you to see the way the CEO Ken Chenault (one of the best in the world today, by the way) is paid at AMEX: he doesn't get paid unless YOU (the shareholder) get a minimum return on your investment details here

I think that based on AMEX's stellar ROE, juiciest net margins, lowest subprime/write-down exposure in the biz and global growth, Ken isn't worried about his future cash flow-- he will be cashing out one day with a 9 figure pile of greenbacks.

If it dips into the high 30's, I intend to buy some shares and hold them for the long term in my RRSP. I'm hoping the stock price will continue to fall even further over the next few quarters so I can gradually add to the position.

American Express meets all of Buffet's "Thinking like an owner" principles (and in fact he owns 13% of the float):

1. the biz is simple and easy to understand how they make their money. 2.5% on every transactions plus cash advances at varying rates.
2. biz has a consistent operating history and has weathered several financial crises
3. biz has favourable long-term prospects and a global footprint
4. Management is rational. See AXP's last conference call for a cool analysis of current and future conditions. I like how the CEO refuses to speculate in the short term and instead refers to prior similar circumstances (i.e. early 2000's, 1990) and the lessons learned.
5. Management is candid with shareholders.
6. Management resists the institutional imperative
7. Double digit return on equity over the long term (high 30's!)
8. Profit margins highest amongst comps (13%)
9. creates at least one dollar of market value for every dollar retained via dividends and capital gains
10. Has a higher intrinsic value than market designates and can be bought for a significant discount. Currently trading in the low 40's and fair market value per morningstar mid 60's.

I think it is highly probable that American Express will weather this economic storm and continue to grow at a moderate pace. I think that the margin of safety is excellent.