Bank of America (NYSE: BAC) has been one of Warren Buffett's favorite stocks for a while. He took a position for the first time in 2007, and it has become a sizable piece of the total since then.

He made headlines over the past few months for selling off a percentage of his position in Bank of America, which could lead investors to believe he's not a big fan these days. However, that would be a mistaken assumption. Bank of America stock still accounts for a hefty 10% of Berkshire Hathaway's total portfolio -- its third-largest position.

But does that mean it's not such a great value for new investors? Investors on the fence or who are looking for a great bank stock to add to their portfolio might want to consider American Express (NYSE: AXP) instead.

Overtaking Bank of America for the second-largest spot

Buffett has owned American Express stock since 1995, making it his second longest-held stock, right behind Coca-Cola. These are two stocks Buffett has said he would never sell. He added Apple to that status recently and sold a large chunk of it right after, but he's held on to every share of Coke and American Express he's ever purchased.

Since the recent string of BofA sales, American Express has overtaken it as the second-largest position in the Berkshire Hathaway portfolio. It currently accounts for 13.1%, and although that's partially because Buffett has sold BofA stock, it's also because American Express stock is outpacing BofA's right now.

More than a credit card company

People know American Express for its credit cards, but it has expanded into a much larger business. Most prominently, it's a bank, and it's all online. So while the name might still conjure up people in business suits, the company's much more attuned to the needs of a young generation of users who are looking for digital financial services. It's also heavily invested in small business solutions and the merchant side of the coin (or credit card).

The bank part of the business plays a larger role than simply expanding the company's service platform. American Express has a closed-loop credit card network, which means it funds its own credit cards. Networks like Visa and Mastercard work with banks like Bank of America, which fund the credit for the purchase, while Visa and Mastercard provide the network over which the purchase and change of money takes place.

American Express does it in one shot, and that comes with several benefits. The company is cash rich (which is one reason Buffett loves it), it has more control of its business, and it has several segments that work together and provide varied revenue streams -- another feature Buffett looks for in a great business.

More than a bank

At the same time, it has several benefits over a standard bank stock. It benefits from higher spending, and the various portions of its business balance each other out under pressure.

It also targets an affluent clientele that's able to part with the high fees it charges for the privilege of using its fee-based cards and getting the awards and perks that come with them. Note that not all of American Express' cards charge annual fees, which makes them more accessible to a larger population and brings more users into its ecosystem.

So while it has increased its provisions for losses under current economic conditions, it's been posting strong growth, including profits. It reported a 44% year-over-year increase in net income in the second quarter, or 21% without the proceeds of a sale. It's investing in new marketing campaigns, but still feels that it doesn't need those proceeds for the investments. So it's passing that along to raise earnings per share (EPS) guidance for the full year from around $12.90 to $13.50.

Reliable and growing

American Express isn't always a market-beating stock, and it may not appeal to growth investors. However, if you're looking for a bank stock, the purpose is usually tied to the value it provides. American Express is a rock-solid bank stock that should grow over time with low risk. It also pays a dividend that yields 0.96% at the current price.

That's lower than usual because American Express stock is on fire -- up 46% this year, more than double the S&P 500. Even value investors are benefiting from American Express' top-notch performance right now with high growth.

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American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jennifer Saibil has positions in American Express and Apple. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool has a disclosure policy.

Should You Forget Bank of America and Buy This Magnificent Bank Stock Instead? was originally published by The Motley Fool