Buffett has long argued “never invest in a business you cannot understand”, so here is a simple outline of what these companies do.
American Express issues the card in your wallet, but crucially, it also runs the network the payment travels down. That means it gets paid twice on every swipe: once by the cardholder, and once by the merchant. Its real edge is its customer base, wealthier, stickier, and less likely to stop spending the moment things get rocky.
Coca-Cola barely makes Coca-Cola any more. It sells the concentrate and syrup, licenses the brand to bottlers around the world, and lets them deal with the factories, fridges and delivery fleets. Coke’s job is simpler, and arguably harder: it just has to keep you wanting one.
Chubb is the world’s largest publicly listed property and casualty insurer by underwriting income. It insures homes, cars, businesses and the odd superyacht, and makes money two ways: by charging more in premiums than it pays out in claims, and by investing that premium cash while it sits in reserve waiting for a claim that may never come, the “float”, arguably one of the cleverest mechanisms in finance.
A note on the figures above: they’re illustrative, built from each stock’s historical average annual return with dividends reinvested and applied evenly across the period, not an exact month-by-month price series. Past performance is not a guarantee of future results.