With 72% institutional ownership, Arista Networks, Inc. (NYSE:ANET) is a favorite amongst the big guns

Key Insights

• Given the large stake in the stock by institutions, Arista Networks' stock price might be vulnerable to their trading decisions
• A total of 11 investors have a majority stake in the company with 52% ownership
• 18% of Arista Networks is held by insiders

To get a sense of who is truly in control of Arista Networks, Inc. (NYSE:ANET), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 72% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

Let's delve deeper into each type of owner of Arista Networks, beginning with the chart below.

Check out 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 can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Arista Networks' earnings history below. Of course, the future is what really matters.

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. Our data suggests that Andreas Bechtolsheim, who is also the company's Top Key Executive, holds the most number of shares at 15%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. With 7.4% and 6.4% of the shares outstanding respectively, The Vanguard Group, Inc. and BlackRock, Inc. are the second and third largest shareholders. Additionally, the company's CEO Jayshree Ullal directly holds 3.1% of the total shares outstanding.

After doing some more digging, we found that the top 11 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over the company.

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 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.

It seems insiders own a significant proportion of Arista Networks, Inc.. It is very interesting to see that insiders have a meaningful US$22b stake in this US$123b 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 10% 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.