Today, dear friends, we start the week with… well, some guessing.
Lots of readers have asked about this latest ad from the Motley Fool Stock Advisor, so we’re going to dig in and see if we can get a good answer from the Thinkolator… but I’ll warn you up front that there aren’t enough clues to be definitive.
So let’s just dig in… Tom Gardner starts out, as all Fool pitches do, by mentioning the huge returns that Stock Advisor has shown from their best investments (12,345% from Amazon, 19,250% from Netflix, etc.), and then goes on to start hinting at his latest favorite:
“I’ve stumbled upon an under-the-radar stock I believe could be one of the greatest discoveries of my 25 years as a professional investor.
“I realize that’s a bold statement, so allow me to explain…
“This small, California-based company is pioneering breakthrough technology that is enabling companies to move vast quantities of data over the Internet at lightning speeds.
“And as the world has become more and more reliant on the Internet for everyday needs, this company has seen its revenue explode. The intense demand for this technology has helped the company race from zero to $1 billion in sales in just eight years.”
Other clues? We’re told that Microsoft, Alphabet and Amazon are all customers of this company… and, of course, that “most investors have still never heard its name.”
And we’re told that he has recommended the stock a total of 12 times already… and that…
“I even invited their CEO to Motley Fool Headquarters to personally tell her how much I believe in her company and why I was staking $523,111 of The Motley Fool’s own money on their stock.”
So we know it’s a stock with a female CEO, and it’s one that the Motley Fool has not just recommended, but has actually bought.
So who’s this? Thinkolator says, with a rather tepid 85% likelihood, that this is Arista Networks (ANET).
Why Arista? Well, it is a cloud-focused networking equipment company, focused on the speedy movement of data… think Cisco (CSC)), but really focused on the biggest data center applications.
And it does have a female CEO in the pretty understated Jayshree Ullal, who was recruited from Cisco to get Arista going about ten years ago.
And we know that the Motley Fool has been investing in the stock, and that Tom Gardner himself had recommended it at least a couple times prior to a year ago, when it was the subject of a different Fool teaser ad. The Fool had only invested $280,000 at that time, but, depending on the actual price they paid, it could have been in the $533,000 neighborhood a couple weeks ago, when ANET was near all-time highs (or, of course, they could have invested more in the past year).
And when it comes to the one semi-specific clue, the “zero to $1 billion” in sales in eight years, that’s an equally semi-specific match — Arista did start selling their products in 2008, though they didn’t go public until 2014 (they were backed by some early Cisco scientists and Google investors, who bankrolled the first years of development), and they hit that billion-dollar level for annual sales late in 2016.
Interestingly, given that this is the tenth anniversary of the bankruptcy of Lehman Brothers, Lehman was actually their first big customer — the first wave of demand for this faster internet and faster data movement was among the high frequency traders, who could benefit from getting their data or placing their orders even a few milliseconds faster than the competition, and then other big companies who want to speed up their data started coming aboard. For a while they were plagued by back-and-forth patent infringement and intellectual property theft lawsuits with Cisco, but they settled most of that, at least temporarily, just a few weeks ago (part of the settlement was a 5-year embargo on most new litigation between the two, though there’s also still an outstanding appeal on their older copyright case — so it’s possible that the $400 million ANET paid in the settlement this year wont’t entirely be the end, but the big stuff seems taken care of for now).
I didn’t invest in Arista last year, sadly (it’s up a good 50% since I last wrote about them), but I summed it up as “hard to buy after a steep climb, but probably reasonably valued at a forward PE of 33 given the expectations