How This Dow Stock Earns Its Keep

The following video is part of our "Motley Fool Conversations" series, in which consumer goods editor and analyst Austin Smith discusses topics across the investing world.

In today's edition Austin helps investors learn about where one of Warren Buffett's favorite Dow stocks -- American Express (NYS: AXP) -- gets its cash. The closed-loop merchant network does not have the same reach as its open-loop competitors like Visa (NYS: V) and MasterCard (NYS: MA) , but the company does realize more value from the whole transaction because it controls more of the purchase. The company spins off a tremendous amount of cash for investors, so it's easy to see why Buffett holds such a large stake in it.

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At the time thisarticle was published Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Costco Wholesale and MasterCard.Motley Fool newsletter services recommendAmerican Express, Costco Wholesale, and Visa. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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