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The Thesis
When a fraud scandal caused American Express stock to crash 50%, a young Buffett recognized the core charge card business was completely unaffected and bet big.
The Story
In 1963, a commodities trader named Tino De Angelis perpetrated a massive fraud involving fake inventories of salad oil, and American Express was on the hook for $60 million in warehouse receipts it had guaranteed. The stock plunged more than 50% as investors feared the losses could bankrupt the company. Wall Street was panicking, and the situation looked dire on paper.
A 33-year-old Warren Buffett did something remarkably simple: he went to restaurants and stores and watched people use their American Express cards. The charge card business was thriving — customers didn't care about salad oil. Buffett invested 40% of his partnership's capital, approximately $13 million, into American Express shares — a massive concentrated bet. Within two years, the stock more than doubled. The investment made his partners a fortune and cemented Buffett's conviction that brand power and consumer loyalty are the most durable competitive advantages in business. The methodology — ignoring Wall Street noise and observing real-world consumer behavior — became a hallmark of his approach.
Key Insight
Go see for yourself — sometimes the best research is watching customers interact with a business rather than reading analyst reports.
“Price is what you pay. Value is what you get.”
Warren Buffett
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See how Glen Bradford applies these principles to his own investing. Long Fannie Mae & Freddie Mac junior preferred — conviction meets patience.