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Is ANET Stock A Buy or Sell?

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We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Arista Networks Inc (NYSE:ANET) based on that data.

Is ANET stock a buy? Arista Networks Inc (NYSE:ANET) was in 35 hedge funds' portfolios at the end of December. The all time high for this statistic is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ANET has seen an increase in enthusiasm from smart money recently. There were 27 hedge funds in our database with ANET positions at the end of the third quarter. Our calculations also showed that ANET isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to check out the new hedge fund action encompassing Arista Networks Inc (NYSE:ANET).

Do Hedge Funds Think ANET Is A Good Stock To Buy Now?

At Q4's end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in ANET a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in Arista Networks Inc (NYSE:ANET) was held by Renaissance Technologies, which reported holding $131.1 million worth of stock at the end of December. It was followed by Balyasny Asset Management with a $44.7 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Force Hill Capital Management. In terms of the portfolio weights assigned to each position Force Hill Capital Management allocated the biggest weight to Arista Networks Inc (NYSE:ANET), around 4.78% of its 13F portfolio. Mondrian Capital is also relatively very bullish on the stock, dishing out 1.74 percent of its 13F equity portfolio to ANET.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the biggest position in Arista Networks Inc (NYSE:ANET). Balyasny Asset Management had $44.7 million invested in the company at the end of the quarter. Suraj Parkash Chopra's Force Hill Capital Management also made a $23.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, Ryan Caldwell's Chiron Investment Management, and Louis Bacon's Moore Global Investments.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Arista Networks Inc (NYSE:ANET) but similarly valued. These stocks are Nokia Corporation (NYSE:NOK), W.W. Grainger, Inc. (NYSE:GWW), XP Inc. (NASDAQ:XP), Realty Income Corporation (NYSE:O), Nasdaq, Inc. (NASDAQ:NDAQ), Farfetch Limited (NYSE:FTCH), and PPL Corporation (NYSE:PPL). This group of stocks' market values resemble ANET's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOK,19,186378,-2 GWW,30,507444,2 XP,29,472977,9 O,24,238964,0 NDAQ,27,340111,-5 FTCH,47,3034788,7 PPL,21,152416,0 Average,28.1,704725,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $705 million. That figure was $397 million in ANET's case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 19 bullish hedge fund positions. Arista Networks Inc (NYSE:ANET) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ANET is 68.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately ANET wasn't nearly as popular as these 30 stocks and hedge funds that were betting on ANET were disappointed as the stock returned 6% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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