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Warren Buffett Watch
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While American Express probably won't need his help, Warren Buffett could come to the company's rescue if things get really bad, according to Barron's. |
But the bullish article by Andrew Bary headlined American Express: Nowhere Near Its Credit Limit argues that American Express probably won't need to call on Buffett for help, because it has enough cash to get through the tough times to come.
Buffett's Berkshire Hathaway is already the biggest shareholder in AmEx with 151 million shares, a 13 percent stake. Buffett first invested in the company four decades ago.
(Berkshire's Q3 stock portfolio snapshot was released Friday evening.)
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The stock is down 61 percent this year to an 11-year low of 20 on "worries about the company's reliance on credit-markets funding, rising losses on its credit-card loan portfolio and weakening consumer spending worldwide." Current price: [AXP
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All legitimate concerns, writes Bary, "but the market may have overreacted because AmEx should have enough liquidity even if credit-market conditions remain tough in 2009" and is expected to be "solidly profitable" next year.
But if things do get really bad, Bary thinks Buffett would be willing to "pump in several billion dollars in new capital" or even buy the whole company. AmEx's market value has dropped to just $23 billion, "making it easily digestible" for Berkshire, even at a premium.
The bottom line: "While next year is likely to be difficult, the company should come through in good shape. And if things get really tough, (CEO Ken) Chenault probably can pick up the phone and find a willing listener in Omaha."
Current Berkshire stock prices:
Class A: [US;BRK.A
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Class B: [US;BRK.B
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Questions? Comments? Email me at
Data is a real-time snapshot *Data is delayed at least 15 minutes