American Express Company (NYSE: AXP) or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States.

American Express was initially founded by Henry Wells and William Fargo in 1850. Wells and Fargo wanted to expand the company to California, but the directors of American Express opposed the idea, as an incumbent express company had a strong position in California at the time. So Wells and Fargo decided to go it alone and start another company of their own namesake in 1852.

The company was then organized as an express mail and banking company, but would later expand into money orders and traveler’s cheques. Today the business derives most of its revenue from discount fees it charges merchants in addition to cardholder fees. The companies’ moat is secured by the network effects it has built over the past 50 years. American Express describes their international credit charging network as a “closed loop” in their financials.

Late in 1963 a salad oil scandal occurred when an American Express subsidiary found itself possibly liable for hundreds of millions of dollars worth of claims arising from quantities of salad oil that turned out not to exist. An American Express subsidiary that issued warehouse receipts mistakenly certified the existence of huge quantities of salad oil that had been fraudulently confirmed to it as being in tanks in Bayonne, New Jersey. The crisis could have left American Express with a negative net worth.

1964: Due to a fraud scandal, American Express shares fall to $35. While the world is selling the stock, Buffett begins to buy shares en masse.

1965: The American Express shares which were purchased shortly before are selling for more than double the price Warren paid for the them.

1967: American Express hits over $180 per share, making the partnership $20 million in profit on a $13 million investment.

'A great investment opportunity occurs when a marvelous business encounters a one-time huge, but solvable problem,' Buffett says.

The reason why Warren Buffett is the courage to invest heavily American Express American Express Company is a very good business, because the American Express traveler's checks can bring a steady stream of "cash flow." After all, travelers checks are more secure than cash, if lost or stolen, you can specify the location in the world free access to a replacement, is the necessary complement to the credit card, he believed that the basic operations of American Express will not be negative in this scandal impact. .

Warren Buffett's was especially successful because not only did he identify an excellent company with a solvable crisis, but he chose to double down and invest heavily as well. Generally, these opportunities arise when a short-term hardship facing a company causes investors to underestimate the long-term strength of the company's business model.