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Should You Be Tempted To Sell Arista Networks (ANET) Stock

Giverny Capital recently released its Q1 2020 Investor Letter, a copy of which you can download below. You should check out Giverny Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Giverny Capital highlighted a few stocks and Arista Networks Inc. (NYSE:ANET) is one of them. Arista Networks is a computer networking company based in California. Year-to-date, Arista Networks Inc. (NYSE:ANET) stock gained 10.7% and on May 22nd it had a closing price of $220.17. Here is what Giverny Capital said:

“Arista Networks makes switching equipment and routers used by cloud computing titans Microsoft and Facebook, as well as large data centers and corporations. Arista competes with the formidable Cisco Systems by building innovative and less expensive hardware that it combines with Linux-based operating software to make it easier for customers to operate their data networks. The growth of cloud computing and hyperscale data centers has been a boon to Arista: from 2015 to 2019, Arista nearly tripled revenue and grew operating profit by 440%.

While Arista has several thousand customers, Microsoft and Facebook generate about 40% of revenue as they invest massively in their cloud networks. Recently, these two giants have slowed their rate of spending, causing Arista’s stock to tumble. There is risk in this level of customer concentration, but we think the growth of cloud computing and large-scale data centers means these two and many others will be investing heavily in their networks for years. And we are persuaded that Arista’s model – great hardware controlled by user-friendly software that allows customers to manage their rapidly growing data center networks – is a winner.”

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In Q4 2019, the number of bullish hedge fund positions on Arista Networks Inc. (NYSE:ANET) stock increased by about 13% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with ANET’s growth potential. Our calculations showed that Arista Networks Inc. (NYSE:ANET) isn’t among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.