Key Insights
- Given the large stake in the stock by institutions, Arista Networks' stock price might be vulnerable to their trading decisions
- 50% of the business is held by the top 13 shareholders
- Recent sales by insiders
A look at the shareholders of Arista Networks Inc (NYSE:ANET) can tell us which group is most powerful. With 70% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And things are looking up for institutional investors after the company gained US$5.0b in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 20%.
Let's take a closer look to see what the different types of shareholders can tell us about Arista Networks.
See our latest analysis for Arista Networks
What Does The Institutional Ownership Tell Us About Arista Networks?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in Arista Networks. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Arista Networks' historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Arista Networks is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Arista Networks' case, its Top Key Executive, Andreas Bechtolsheim, is the largest shareholder, holding 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.8% and 6.8% of the stock. Furthermore, CEO Jayshree Ullal is the owner of 2.9% of the company's shares.
A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Arista Networks
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our information suggests that insiders maintain a significant holding in Arista Networks Inc. It is very interesting to see that insiders have a meaningful US$24b stake in this US$136b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
The general public, who are usually individual investors, hold a 12% stake in Arista Networks. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Arista Networks better, we need to consider many other factors. Take risks for example - Arista Networks has 1 warning sign we think you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.