4. Arista Networks Inc. (NYSE:ANET)
Steve Cohen‘s Q1’2024 Stake: $286,478,781
Billionaire Steve Cohen increased his hold in Arista Networks Inc. (NYSE:ANET) by 19% in the first quarter. Point72 Asset Management now owns a $286 million stake in Arista Networks Inc. (NYSE:ANET). Arista Networks Inc. (NYSE:ANET) will play a key role in the AI revolution as Arista Networks Inc. (NYSE:ANET) makes networking and connectivity equipment for PCs, data centers and networks. Last year, Morgan Stanley’s Meta Marshall said that AI networking could be an $8 billion opportunity, and Arista Networks Inc. (NYSE:ANET) would be one of the biggest beneficiaries in the industry.
Jefferies analyst George Notter in a latest note praised Arista Networks Inc’s (NYSE:ANET) recent quarterly results, saying that Arista Networks Inc’s (NYSE:ANET) management sounded “great” talking about progress of their backend network AI trials. He reiterated a Buy rating on the stock and increased his price target to $340 from $320.
Giverny Capital Asset Management stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its fourth quarter 2023 investor letter:
“We did a bit of portfolio sculpting during the year, with mixed results. We trimmed Arista Networks, Inc. (NYSE:ANET) several times during the year as it soared. Those trims, a very small one in March at roughly $163 and a larger one in August at $183, don’t look smart with Arista finishing the year at $235 (and up more in January). Arista rose 94% this year. The good news is, Arista finished the year as our second largest holding, at 7.9% of the portfolio.
If you are wondering how I could sell some Arista at $163 but then hold most of it at $235, the answer is that Arista’s outstanding competitive position in Artificial Intelligence became clearer to me as the year progressed. I felt in March that Arista would earn $8 per share in a few years. I see today that it might earn $8 in 2025.
It’s possible there is AI-related froth in the Arista stock price, but also probable that Arista will continue to grow rapidly as the computing centers that process AI queries require enormous amounts of data bandwidth. I believe Arista’s routers and switches are the best tools for routing so-called hyperscale traffic. Also, its operating software allows computer giants to manage the kudzu-like growth of their data centers, lowering their total cost of operation.
The sales of both Arista and Heico reflected my desire to manage PE multiple risk. I keep learning the hard way, however, that trimming your winners generally doesn’t add value. If the valuation is beyond justification, sell the position. If the valuation is high but the business continues to dominate its niche, grow steadily and add value for customers, maybe just take a walk around the block until the urge to sell goes away.”
