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Annual Review, Part 4

Checking in on Real Money Portfolio holding ANET, SHOP, CCI, PW, SAND and more...

By Travis Johnson, Stock Gumshoe, February 14, 2020

OK, I know, it’s getting a little ridiculous that I still haven’t covered the whole portfolio of stocks with my annual review updates — but for some I’m waiting to see what the quarterly update tells me, and for others, well, I’m just trying to catch up. Here’s what I’ve got for you by way of updated thinking today… and it’s even in alphabetical order (well, almost):

Arista Networks (ANET) 0.3% position, $233 cost basis. This is a hold for me. I built up a larger Arista Networks position last year, then sold on a stop loss when they released disastrous guidance in November. It appears the business is recovering a bit, and I like the long-term potential as 400-gig networking comes online and they continue to have strong cloud business so I’d be willing to buy more if the shares dip further, but heavy customer concentration and a lack of sales visibility make it quite volatile.

Arista Networks (ANET) reported last night, just a day or so after its major competitor, Cisco Systems (CSCO)… and Cisco’s weakness led some to wonder whether the whole sector was again faltering with slower order flow from the big “cloud titan” companies, which is what drove Arista down last quarter and led me to hit a stop loss with most of my position (I held on to a little bit, I do still like the company), or whether, some dared to dream, Arista and others were just still taking share from Cisco and the overall pie might still be growing.

Arista has been gradually taking share from Cisco for years, but for a growth valuation like they carry they have to keep positive momentum going each quarter or investors will panic. They didn’t quite manage to do it this time around, they did beat the low expectations on earnings, posting EPS of $2.29 per share, but they didn’t say anything optimistic about orders rebounding or offer strong guidance for early 2020, so the stock dropped by 7% or so. It’s still well above the lows it hit on the terrible guidance they gave in November, and is now getting back to a reasonable valuation of just about 20X forward (2021) earnings, but there’s still a fair bit of uncertainty and the expectations for earnings in 2020 are still well below the 2019 numbers, and they do still have a ...

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