American Express(NYSE: Axp) and Costco in bulk(Nasdak: cost) It has achieved incredible returns for investors in the long run, as both shares excel over S & P 500(Snpindex: ^Gspc) For three years, five years and 10 years.
Although it works in two different sectors (and does not accept Costco America Express because of its partnership with Visa), Both companies have a shared sudden amount.
American Express and Costco annual fees for services that have free alternatives. There are a lot of zero credit cards, there is no shortage of grocery stores and adult retailers where you can simply walk and shop. However, the two companies still outperform its competitors.
Here’s how America Express and Costco building the rules of loyal customers, and why both of them Arrows profits It may be worth buying even if the S&P 500 is sold next year.
Photo source: Getty Images.
Consumers resort to American Express for its program and exceptional rewards, although the annual fees on their cards can be hundreds of dollars.
The fastest age groups in the company through new accounts and spending are the millennial generation and General Zires. In 2024, AmeX added 13 million new ownership cards to its network and achieved 26 consecutive years of net growth in card fees.
Cards fees represent $ 8.45 billion only 16.8 % of the total revenue of 2024. It may surprise you to know that the card holders’ rewards are the highest AmeX expenses to a large extent – more than the cost of salaries and employee benefits. In fact, the company spent $ 16.6 billion on the bonuses of the card holder in 2024 – nearly twice that collected in cards fees. This means that card holders really get a good deal.
The company holds more than this deficiency of discount revenues (merchant fees) – which amounted to 69.8 % of the total revenue in 2024. However, the net card fees revenues increased by 39.2 % from 2022 to 2024 compared to 14.5 % in merchant fee revenues, indicating a significant increase in the number of people who record cards.
American Express attracts new customers despite increasing the annual fees of its most popular card. In September, she wandered the annual fees on her platinum card from $ 695 to $ 895, but more privileges were also offered.
This rise follows an increase in the gold card membership fee, which moved from $ 250 to $ 325 in July 2024. The price increase shows how the management tends to the base of wealthy consumers and small and medium -sized companies. American Express does not impose the limits of prior spending for qualified customers and companies. Like generous privileges, this is another way that encourages customers to spend more. But the formula works only if the card holders are responsible for their spending.
The easiest way for investors to ensure risk management effectively is to examine the net deletion rate, which represents the main loss of a member of the consumer card or small work, net that the company was able to recover (except for interest). I have an American Express about 2 % net scntling rate, It is exceptional given to the extent of flexible spending.
Finally, the American Express mastered the art of passing value to customers through generous privileges that cost twice as much as it collects in card fees, but it compensates for this deficiency by imposing fees on merchants to process payments. The American Express grows because more people are registered for cards, and the greater their growth, the more motivational merchants is to accept these cards, although they get higher fees.
It is a great business model that benefits from card holders. Customer loyalty is a great competitive advantage during times of economic uncertainty. It is a quality that Costco shares with America Express.
Costco receives an annual membership, but it is also transparent about passing the value of customers. It has a highly 3.8 % high operating margin of only 3.8 %-and half of this margin comes from membership fees. This means that, on average, for every $ 100 the member spends, the company is heading to less than two dollars in operational profit.
Costco is a marketing genius. For 40 years, I kept the Hot Dog price on a quarter of a pound with a 20 ounce soda at only $ 1.50. The price of its annual membership does not raise regularly, unlike other companies that constantly raise prices.
Hot Dog is what is known to be the leader of the loss. It is a way to make customers in the door instead of profit from this specific product. A type like how shaving handles are usually cheap, while the blades are more expensive and act as a frequent work for Razor Handle Manufacy.
Costco’s value proposal is frequented by customers. The largest of the barriers that prevent a purchase from making is whether the price is reasonable for alternatives and if the price justifies/need.
By transferring value, consumers may have a greater opportunity to go to Costco with their guard. So, if they see something they love, they will not ask if its price is good, but assume that the price is at least fair, then they decide whether they want it or not.
It is similar to the strategy it uses Wal MartWhich goes to the soles of the feet Amazon On the price. This has proven that it is very effective this afternoon of restricted consumer spending. It is a great cause of Costco and Walmart stocks well and why did the retail outlets on experience goal Struggle to get shoppers in the door.
Membership fee is a major profit for Costco, while it is a relatively small part of the American Express revenue mix, which passes along the value to the card holders through the rewards that justify the card fees. It loses the money on the expenses of the card bonus, but it recovers it through the merchant fee.
While membership fees are a pure profit for Costco, and in return, it passes along the value by selling goods in large quantities on shaving margins. Numbers show that both organic two are really value for customers, which is an incentive for customer loyalty.
The two companies are very well operated, making them strong options for long -term investors. However, American Express stands out as a better purchase than Costco for 2026 because it is a much better value at 22.3 times from profits forward compared to 47 for Costco.
AmeX raised its profits for years, but it only gives 1 % because the stock was a good performance. While Costco gives only 0.6 %, but sometimes it pays special profits when you reach a cash surplus. I am the best quarterly distributions for one -time profit from special profits.
Finally, the American Express and Costco is so good that the only question from the investment point of view is if the evaluation is achieved. Investors who do not mind paying quality may want to buy both shares, while investors who focus on value may want to go with American Express Over Costco.
Before purchasing stocks at America Express, think about this:
the Motley Adviser is a lie The analyst’s team has just identified what they think 10 best stocks For investors to buy now … American Express was not one of them. The ten shares that made the pieces can produce monster revenues in the coming years.
Look at when Netflix This list was submitted on December 17, 2004 … if you invest $ 1,000 at the time of our recommendation, You will have 652,872 dollars!* Or when Nafidia This list was presented on April 15, 2005 … if you invest $ 1,000 at the time of our recommendation, You will have 1,092,280 dollars!
Now, it is worth noting Stock consultant The average total return is 1062%-Crushing supremis to the market compared to 189 % on the S&P 500 index. Stock consultant.
*The stock consultant dates back from September 22, 2025
American Express is an advertising partner for Motley Fool Money. Daniel Fileber It has jobs in the target and has the following options: short $ 2025 $ 100 on the target. Motley Fool has positions in Amazon, Costco Whomesale, Target, Visa and Walmart. Motley deception has Disclosure.
