Giverny Capital Asset Management, LLC, an investment management company, recently published its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. The firm’s model portfolio returned 16.26% (net) in the fourth quarter compared to an 11.69% return for the S&P 500 Total Return Index. The fund had an annual return of 29.07% compared to the 26.29% return for the Index during the same period. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Giverny Capital Asset Management featured stocks such as Arista Networks, Inc. (NYSE:ANET) in the fourth quarter 2023 investor letter. Headquartered in Santa Clara, California, Arista Networks, Inc. (NYSE:ANET) provides cloud networking solutions. On February 5, 2024, Arista Networks, Inc. (NYSE:ANET) stock closed at $272.97 per share. One-month return of Arista Networks, Inc. (NYSE:ANET) was 11.33%, and its shares gained 102.33% of their value over the last 52 weeks. Arista Networks, Inc. (NYSE:ANET) has a market capitalization of $84.921 billion.
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.”
A close-up of a network administrator’s hands working on a cloud computing server.
Arista Networks, Inc. (NYSE:ANET) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held Arista Networks, Inc. (NYSE:ANET) at the end of third quarter which was 62 in the previous quarter.
We discussed Arista Networks, Inc. (NYSE:ANET) in another article and shared Madison Mid Cap Fund’s views on the company. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
