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American Express (AXP) CEO Stephen Squeri now has a direct line to legendary investor and No. 1 AmEx shareholder Warren Buffett — and all the business magic that comes with it. It's something Squeri views as a "privilege."
That special access is in sharp contrast to when Squeri first dined with the Berkshire Hathaway (BRK) chairman, known as the "Oracle of Omaha," many years ago.
"It was very intimidating," Squeri recalled in a chat with Yahoo Finance at his downtown NYC office, ahead of Berkshire's big annual meeting in Omaha on Saturday.
"Fortunately, Ken [former AmEx CEO Ken Chenault] was there, and there were other people there. But I looked at that and I said to myself here I am – and I'm senior vice president at the time, which is one of our top 120 people in the company – and in what world did I ever believe I'd be sitting down and having lunch with Warren Buffett. I remember calling my dad and saying, 'I just had lunch with Warren Buffett!'"
About five years into his tenure as head of AmEx, Squeri more fully understands the business and investing magic of billionaire Buffett. The Berkshire Hathaway boss's approach has led to his being a very long-term investor in AmEx, one who has been handsomely rewarded as the financial services company has grown.
The veteran investor's interest in AmEx began in the early 1960s when, in classic Buffett form, he smelled a lucrative opportunity in the heart of a crisis.
In 1963, Allied Crude Vegetable Oil Company founder Anthony De Angelis used its inventory as collateral for loans from more than 50 entities, including AmEx. De Angelis used these loans to drive up prices in the soybean oil market and increase the value of Allied.
Eventually, a whistleblower came forward claiming that Allied was misleading AmEx to get more loans, by filling up oil tanks with water. This was proven to be true, and De Angelis filed for bankruptcy and went to prison for seven years. The impropriety became known as the "salad-oil scandal" and prompted concerns on Wall Street, given AmEx had to pay Allied's bill.
Buffett used the opportunity to acquire 5% of AmEx for roughly $20 million.
The credit-card boom of the 1970s and 1980s made AmEx a top player in the market. By the late 1990s, two-thirds of American households had a payments card.
Buffett established his first large position in AmEx in 1991 with a $300 million purchase. Within seven years, he owned more than 50 million shares of the company.
Berkshire Hathaway hasn't purchased any AmEx stock since the late 1990s, but its stake has continued to increase as a result of stock buybacks. Today, Buffett has a $23 billion-plus stake in AmEx, equaling 20.4% ownership.