Yahoo Finance With 70% institutional ownership, Arista Networks, Inc. (NYSE:ANET) is a favorite amongst the big guns
Key Insights
Significantly high institutional ownership implies Arista Networks' stock price is sensitive to their trading actions
The top 10 shareholders own 51% of the company
If you want to know who really controls Arista Networks, Inc. (NYSE:ANET), then you'll have to look at the makeup of its share registry. With 70% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
Let's delve deeper into each type of owner of Arista Networks, beginning with the chart below.
View 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.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Arista Networks. 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. For context, the second largest shareholder holds about 9.4% of the shares outstanding, followed by an ownership of 5.9% by the third-largest shareholder. Furthermore, CEO Jayshree Ullal is the owner of 3.2% of the company's shares.
On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that insiders maintain a significant holding in Arista Networks, Inc.. It has a market capitalization of just US$90b, and insiders have US$17b worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Arista Networks. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Arista Networks , and understanding them should be part of your investment process.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
