Warren Buffett is often hailed as one of the greatest investors of all time, having delivered exceptional returns for shareholders of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) over many decades. Under his leadership since 1965, the company's stock has achieved an impressive compound annual growth rate of 19.8% through 2023, nearly doubling the S&P 500, which saw a 10.2% return, including dividends.

Given Buffett's track record of market-beating success, it's worth examining Berkshire's $300 billion stock portfolio to identify potential investments that could help you surpass market performance. With that in mind, let's take a closer look at two of Berkshire's longest-held positions, American Express (AXP 0.58%) and Visa (V 0.83%), and explore which might be the better buy for investors today.

Here's when Berkshire invested in American Express and Visa

Berkshire Hathaway began building its initial $1.3 billion position in American Express in 1991, continuing its purchases through 1995. That investment in what was then a bank holding and payments company has since grown to $46.3 billion. Over time, Berkshire has increased its stake in American Express from nearly 10% to 21.6% -- without purchasing additional shares or reinvesting dividends.

Warren Buffett highlighted his long-term commitment to American Express (and Coca-Cola) in his 2023 letter to shareholders: "When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable."

By contrast, Berkshire's investment in Visa began much later, in 2011, three years after the payments giant went public. Unlike its American Express holdings, Berkshire has traded its Visa position, making six additional purchases and three sales since its initial investment. Today, Berkshire owns 8.3 million Visa shares, worth approximately $2.9 billion, representing about 1% of its stock portfolio.

While the Visa investment wasn't originally Buffett's idea -- it was initiated by portfolio managers Todd Combs and Ted Weschler -- he has since acknowledged its merits. Reflecting on Visa and (and competitor Mastercard), Buffett admitted in 2018: "I could have bought them as well, and looking back, I should have."

A look at American Express' and Visa's recent financials

Before analyzing each company's recent financial results, it's important to understand a key difference between the two: American Express operates as a closed-loop network, whereas Visa functions as an open-loop network. The main distinction is that American Express issues credit and processes its own transactions, while Visa relies on major financial institutions to support and issue its cards, benefiting from transaction volume.

As a result, American Express, with a market capitalization of $218 billion, generates significantly more revenue but less profit than Visa, with a market capitalization of $685 billion.

Looking at each company's December 2024 quarterly results, American Express generated $17.2 billion in net revenue and $2.2 billion in net income, representing year-over-year growth of 9% and 12%, respectively. Conversely, Visa reported $9.5 billion in net revenue and $5.1 billion in net income for the fiscal first quarter, equating to year-over-year growth of 10% and 5%, respectively.

These results illustrate that while American Express is growing its net income faster, Visa is more efficient in converting revenue into profit. This efficiency is evident in Visa's industry-leading operating margin of 66%, compared to American Express' 21.2%. Still, American Express' higher net income growth gives it the slightest edge in this category.

Both companies are shareholder-friendly

American Express and Visa adopt similar approaches to capital allocation. They consistently enhance shareholder value by raising dividends and executing stock buybacks. Dividends provide investors with a steady income, while share repurchases increase individual ownership stakes by reducing the number of outstanding shares.

On the topic of dividends, American Express has paid a quarterly dividend since 1989, with frequent raises since. Today, the company pays a quarterly dividend of $0.70 per share, equating to an annual yield of 1.1%. Additionally, management recently stated its intentions to increase its quarterly dividend by 17% in 2025.

Comparatively, Visa has paid and raised its quarterly dividend for 16 consecutive years, with its last raise coming in at 13%. Today, Visa pays a quarterly dividend of $0.59 per share, which equates to an annual yield of 0.7%.

When it comes to share repurchases, American Express spent $5.9 billion on share repurchases in 2024, and the board is authorized to repurchase roughly 75 million shares of its 702 million outstanding shares or nearly 11%.

Visa has been even more aggressive with share repurchases, spending $17.1 billion over the past 12 months and reducing its outstanding shares by 9.2% over the last three years. As of Dec. 31, 2024, Visa had $9.1 billion still authorized for buybacks, so the company will likely continue this approach.

While both American Express and Visa have demonstrated strong capital allocation strategies, Visa stands out in this category for its consistent dividend growth and larger scale of share repurchases.

AXP Shares Outstanding data by YCharts.

Is American Express or Visa the better buy today?

For the final category, let's briefly examine valuation using the price-to-earnings (P/E) ratio -- which compares a company's market price to its trailing 12 months of earnings per share (EPS) -- and growth prospects as the tiebreaker.

As of this writing, American Express and Visa traded at P/E ratios of 36 and 22, respectively. Given Visa's historically higher earnings, it has typically carried a higher P/E ratio, with a five-year median of 32 compared to American Express' 18.

AXP PE Ratio data by YCharts.

Both stocks trade above their five-year median, likely due to recent guidance. American Express expects 8% to 10% revenue growth and 12% to 16% adjusted EPS growth for 2025, while Visa projects "low double-digit" revenue and "low teens" adjusted EPS growth for its fiscal 2025.

All in all, American Express and Visa are worth owning in any portfolio, considering both companies are entrenched in the global economy and offer promising growth opportunities. Choosing between them is splitting hairs, but American Express gets a slight edge for its better valuation and higher EPS growth prospects.