Giverny Capital Asset Management, LLC, an investment management company, recently published its first-quarter 2023 investor letter. A copy of the same can be downloaded here. The model portfolio of the firm appreciated 6.06%, net of fees in the first quarter compared to a 7.50% return for the Standard & Poor’s 500 Index. For the year ended March 31, 2023, the portfolio returned -10.62% compared to -7.73% for the benchmark, net of fees. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Giverny Capital highlighted stocks like Arista Networks, Inc. (NYSE:ANET) in the first quarter 2023 investor letter. Headquartered in Santa Clara, California, Arista Networks, Inc. (NYSE:ANET) provides cloud networking solutions. On April 25, 2023, Arista Networks, Inc. (NYSE:ANET) stock closed at $153.58 per share. One-month return of Arista Networks, Inc. (NYSE:ANET) was -5.49%, and its shares gained 33.34% of their value over the last 52 weeks. Arista Networks, Inc. (NYSE:ANET) has a market capitalization of $47.265 billion.
Giverny Capital made the following comment about Arista Networks, Inc. (NYSE:ANET) in its Q1 2023 investor letter:
“Our holding Arista Networks, Inc. (NYSE:ANET) continues to generate extraordinary results, which the market recognizes. Arista rose 38% during the first quarter and became our largest holding. Arista makes switches, routers and operating software that power enormous data networks, such as for cloud computing. Microsoft’s Azure cloud business and Meta Platforms’ Facebook and Instagram networks are Arista’s two most important customers. Roughly speaking, Arista has tripled its revenue and profit over the past five years and seems poised to continue growing rapidly for the foreseeable future. Demand for hyperscale computing networks may accelerate as artificial intelligence (AI) chat applications grow. By some estimates, the computer power required to answer Al chat queries is roughly seven times more than for a Google or Bing search. I think the realization that data network capacity needs to be much larger to accommodate Al has driven recent enthusiasm for Arista.
In general, I think when a stock blows through my price target the right answer is to bask in the glory and maybe splurge on a latte rather than my usual morning coffee. Don’t get itchy about locking in a profit. In this case, Arista became our largest holding and roughly 8.5% of the portfolio, while also being one of the most expensive businesses we own on a price-to-earnings basis. Arista earned $4.27 in 2022 and I believe there is good reason to expect it to double EPS again, perhaps by 2026 or 2027. But as the stock traded into the $160s, that represents a PE of 20x estimated earnings in four years. While I believe strongly in Arista’s competitive position, I know that tech giants are facing budget constraints and a pause in their own intense pace of infrastructure growth would not surprise anyone….” (Click here to read the full text)
Arista Networks, Inc. (NYSE:ANET) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 53 hedge fund portfolios held Arista Networks, Inc. (NYSE:ANET) at the end of the fourth quarter which was 42 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 Q1 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.
