The first time I invested a significant amount of money in individual stocks was in 2014. Up until that point I had been investing primarily in index funds while learning things like stock analysis and stock allocation strategies. assets Sure, I had been buying small amounts of stock in certain companies since the early 2000s, but I was more than 90% invested in funds.

Then, in early 2014, I rolled over a 401(k) from a former employer and decided it was finally time to buy some larger (for me) positions in individual stocks. I invested in four stocks, two of which are still in my portfolio today. Both have produced positive total returns, but with a total return of 264% over about 10½ years (about 13% annualized), American Express (NYSE:AXP) has been the highlight.

A lot has happened in the 10 and a half years since I became an Amex shareholder, and not all of it has been good. For example, in 2016, American Express and costco ended their 16-year partnership, and at the time Amex co-branded Costco credit cards accounted for about 10% of all Amex cards in circulation and about 20% of credit card loans with interests

However, there have also been great advances. Shortly after the Costco partnership went away, Amex revamped its flagship Platinum card with perks like free Uber rides aimed at younger, wealthier customers. The Platinum card has been an important driver of growth in subsequent years.

American Express it has also done a good job of adopting online banking products such as savings accounts that provide a low-cost source of capital. The acquisition of Kabbage in 2020 also greatly enhanced the company’s business banking offerings.

Overall, since I bought shares, American Express has increased its revenue by 94% compared to comparable levels in 2014. Overall, revenue is up 147%. And through buybacks, Amex has reduced its outstanding share count by more than 26% since mid-2014.

Even in the most recent quarter, Amex grew its revenue by 8% year-over-year, despite significant reports of consumers curbing discretionary spending. The company’s loan portfolio grew 10% year-over-year to $202 billion, and its annualized card member loan and charge-off rate of 1.9% represents a sequential decline and is much lower than its peers, which shows the quality of assets that Amex has. For context, Capital One has a net credit card discount rate of approximately 5.6%.

First, I bought Amex as a long-term dividend growth opportunity, and the stock (and business) is doing exactly what I want. Management has done a great job of growing the business consistently in a variety of political and economic climates and despite various setbacks, and I have no reason to believe that will change anytime soon. As a credit card lender, Amex has the best customer base in terms of credit quality and an impressive product portfolio. As a closed-loop payment network, Amex earns sliding fees that should gradually increase with customer spending over time.

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