American Express, SoFi, and Berkshire Hathaway present excellent long-term investment opportunities.
Although $3,000 may not appear to be a sufficient amount to begin investing in the stock market—given that many leading stocks sell for hundreds or even thousands of dollars per share—thanks to commission-free platforms and fractional trading, retail investors can now more easily construct a diversified portfolio filled with timeless stocks even with a modest investment.
If I were embarking on my investment journey with $3,000 in hand, I would distribute it across these three enduring financial stocks: American Express (AXP 2.77%), SoFi Technologies (SOFI 6.68%), and Berkshire Hathaway (BRK.A 0.90%) (BRK.B 0.84%). Each of these firms boasts unique advantages, substantial market moats, and significant potential for growth over the coming decades.
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American Express
American Express is frequently compared to Visa (NYSE: V) and Mastercard (NYSE: MA), but it employs a distinct business model. Unlike Visa and Mastercard, which only process transactions on their networks without issuing any cards, American Express both operates its own bank and provides its own cards, directly controlling the customer accounts.
While it holds a smaller share of the credit card market compared to Visa and Mastercard, this is a strategic choice, as American Express targets lower-risk, higher-income clients.
The company’s business model is also well-protected from fluctuations in interest rates. Increasing rates may dampen consumer spending and lower swipe fees, but they can enhance the profitability of its banking segment. This balanced approach makes American Express a more comprehensive investment option than Visa and Mastercard, which do not manage their own banking operations or benefit from higher interest rates. Moreover, American Express is steadily broadening its international presence to lessen its dependence on the U.S. market.
From 2024 to 2027, analysts anticipate that American Express’ revenue will increase at a compound annual growth rate (CAGR) of 8%, with its earnings per share (EPS) growing at a CAGR of 13%. Its stock appears attractively priced at 18 times this year’s earnings and offers a forward yield of 1.2%.
SoFi Technologies
SoFi, short for Social Finance, aims to revolutionize traditional banking by serving as a “one-stop shop” for a wide range of digital financial services. Its offerings include personal loans, credit cards, insurance, estate planning tools, and stock trading services. After receiving a U.S. bank charter in 2022, it launched a digital-only direct bank.
SoFi’s exclusively online approach has captured a younger demographic, allowing it to expand more rapidly than legacy banks. Membership numbers soared from 2.52 million at the end of 2020 to 10.13 million in 2024. Its payment-processing subsidiary, Galileo—which SoFi acquired in 2020—now manages 168 million accounts. Additionally, SoFi became profitable on a generally accepted accounting principles (GAAP) basis in 2024.
Over the past several years, SoFi encountered two significant challenges: a federal freeze on student loans from March 2020 to September 2023 and a drop in new loans due to rising interest rates. Fortunately, this freeze has been lifted, and the Federal Reserve is contemplating two rate cuts this year. As these challenges recede, analysts project SoFi’s revenue and EPS to rise at a CAGR of 19% and 24%, respectively, from 2024 to 2027.
While SoFi may seem pricey at 49 times this year’s earnings, it becomes significantly more appealing at 14 times its forward adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). This makes it an attractive growth stock for investors expecting a shift away from traditional banks to digital-only platforms.
Berkshire Hathaway
Finally, Warren Buffett’s Berkshire Hathaway offers a straightforward method to invest in a diverse array of stalwart financial companies. The core business includes ownership of insurance firms such as GEICO, Gen Re, Alleghany, Wesco, and National Indemnity. In its investment portfolio worth $284 billion, it holds substantial stakes in major companies like Chubb, American Express, Capital One, Bank of America, and Latin America’s direct bank Nu Holdings.
Berkshire Hathaway also diversifies into energy, transportation, and consumer staples via its core operations and investment assets. This breadth and diversification have established it as a dependable long-term investment, consistently outperforming the S&P 500 since Buffett took the reins in 1965.
Rather than focusing solely on GAAP EPS, Berkshire gauges its growth through “operating earnings,” which exclude capital gains or losses from its investment portfolio. This unique metric has experienced a CAGR of 16% from 1994 to 2024, and it is expected to continue its upward progression as Buffett’s eventual successors adhere to his enduring strategies for growth.
Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Leo Sun has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Bank of America, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
