By Michael Cintolo, Vice President of Investments, Cabot Wealth Network
Clear Secure (YOU)
Many times, big winners come from firms that have an established, solid business that’s cranking out solid results—but then have a new angle that could greatly expand the opportunity. That’s one reason we’ve kept a distant eye on Clear, which is best known for its biometric identification spots in more than 60 major airports (it allows you to skip the ID part of the security line, though you still have to go through the physical security), and it’s been branching out its offerings (an app that can verify your identity, eGates that quicken the process, and even ambassadors that can guide/help you from the curb all the way to the gate or your lounge). All told, the firm has about 7.6 million paying members, with total bookings up 25% in Q4, producing a ton of free cash flow ($1.30 per share, well above earnings of 31 cents). All of that is good, but the company is aiming to be a bigger security player: Clear already offers its ID services at some major stadiums and centers, and now it’s Clear1 offering is going after enterprises and big agencies—Clear is working with Medicare now to reduce fraud via better ID services, and it inked a deal with Mount Sinai to install its services in that company’s seven hospitals and 400 outpatient facilities; management said Clear1 has reached “escape velocity” and that many Fortune 100 outfits are in talks to with the company to secure their infrastructure and more. Numbers for Clear1 are scarce as it’s early, but it’s not hard to see the potential—and along with a bullish 2026 outlook (free cash flow easily north of $3 per share), it sent the stock soaring, breaking out of a 15-month consolidation, and shares gained further with the huge recent wait times at airports, though the stock was eventually pulled back in by the market. Even so, the trend is clearly up, and any more color on the size of the deals for Clear1 down the road should continue to bolster investor perception.
Dell Technologies (DELL)
Dell has long been known for its laptop computer business, but the firm has quickly transformed into an AI powerhouse, providing AI-optimized servers that have led to a surge in revenue. For fiscal 2026 (which ended in January of this year), reported two weeks ago, sales jumped 19% to $114 billion with earnings per share hitting $10.30, up 27%. Part of that was from fine, if unremarkable, performance in laptops and other consumer products. Focusing just on AI, however, shows Dell is enjoying even better momentum. In Q4 the business shipped nearly $10 billion in AI servers, just about equal to what it shipped in the first half of FY26. Even better, its order backlog for AI-related products grew to $43 billion in the quarter as a remarkable $34 billion in new AI orders came in the final three months of the fiscal year. (By comparison, three years ago, AI-related sales were $0.) Dell is seeing strength because it’s executing well on optimizing its server designs for AI tasks as well as working seamlessly with partners to offer commercial clients an end-to-end plan for implementing and operating a robust AI system. That allows Dell to get in on the ground floor of clients’ data center plans, selling lots of servers. This year, fiscal 2027, Dell expects AI revenue to double to $50 billion, getting the overall enterprise to about $140 billion in total sales. While AI is the main focus, management does believe that traditional server sales may increase more speedily, given that a large percentage of firms operating Dell servers are now using older models that are likely to be upgraded. The health of the enterprise side of the business means Dell investors aren’t feeling much concern over higher memory prices that have been hammering other PC makers, some of whom expect their memory and data storage costs to double this year. Dell isn’t immune to that, while it also sees its consumer laptop business facing headwinds from those higher costs, leading management to project just a 1% uptick in revenue in that sector. But Dell says AI-related demand is far outstripping supply, which Wall Street is focused on. Analysts see earnings up 23% in the year ahead, and big investors think that’s conservative—after doing nothing for nearly two years, DELL changed character after Q4 results and has continued higher despite a weak market, telling us another big-picture upleg has begun.
DigitalOcean (DOCN)
DigitalOcean is a cloud infrastructure provider that is benefiting from the move of cloud and AI businesses to embrace agentic AI (where digital agents are able to do automated tasks). DigitalOcean says it is gaining traction with large customers who need more than just high-powered GPUs for AI calculations. These customers want a software stack that is optimized for AI inference (where the model actually delivers predictions and outlooks) on a large scale, which management says it has. The AI trend is shifting DigitalOcean from a cloud provider dependent on small and medium-sized enterprises into one that is seeing huge growth with large customers. Its business among customers spending $1 million or more has seen zero churn the past four quarters (!), with that cohort’s spending increasing 123%, according to management. Previously, that category was a challenge for the business, but now it’s the main growth center. DigitalOcean cites its data center capacity in megawatts, a shorthand equating power draw with capacity. Management told investors at the end of February that AI demand will enable the business to add 31 megawatts of capacity over this year and next, with each megawatt supporting $20 million to $25 million in revenue (DigitalOcean averages $22 million per megawatt with its current base). While management doesn’t guide on revenue or earnings, the megawatt jump implies that DigitalOcean, by the end of 2027, could be at a revenue run rate 70% higher than its most recently completed fiscal year, reported the end of February, which registered $901 million in sales. In the current quarter, Wall Street sees $250 million in sales and $0.26 net income per share. Revenue-wise, that would be an 18% increase, on the high end of where DigitalOcean typically comes in with its medium and small client base. Those clients are still spending, which means 2026 and the next year could come in much stronger than historic mid-teens growth. The boost in megawatts through the next two years is probably already booked by clients, given that management says demand far outstrips supply and it is already holding discussions about capacity for 2028 and beyond. The spending to expand will keep EBITDA flat-ish this year, but investors are clearly discounting a much bigger book of business going ahead. The stock has been stunningly strong, dipping early on during the war but then soaring in a huge way to decisive new highs; even a late-month share offering (used to pay off debt and further expand capacity) didn’t dent the stock. Dips are possible (probable?) given the environment, but we think the upside here could be huge down the road.
Kodiak Oil & Gas (KGS)
Kodiak Oil & Gas is one of the three biggest providers of outsourced compression services to the energy sector (all three have about the same capacity), with a focus on high-horsepower equipment that generally garners longer-term deals from big players (typical contract is for three to five years; 90% of equipment is on term deals). That provides stability, of course, though the industry backdrop also helps; because compression is needed mostly for gas and is linked to production, and because of the long CapEx dry spell in the sector, prices (up 40% since 2020) have been rising while utilization (95% in the sector; 98% for Kodiak’s fleet) is super tight, and demand is only likely to increase from here as places like the Permian ramp output. But there’s more to the story than just compression: Kodiak recently spent $675 million to purchase 384 megawatts of distributed power assets, with two-thirds of them currently serving data centers and 21% microgrids; the purchase should goose results near term while providing upside over time as demand for power continues to ramp. In the meantime, business is solid, with management seeing EBITDA crawling higher by 7% this year, supporting the growing dividend (3.4% annual yield), and of course, that view came before oil prices moved up significantly, which is likely to further boost demand. It’s not changing the world, but Kodiak should do a solid, growing business for a long time to come, with the AI power kicker an enticing new angle. After a year-long rest, KGS took off in February and remains in a strong uptrend.
Vertiv Holdings Co (VRT)
Given the mammoth size of the AI infrastructure spending boom, the question arises every few months about how sustainable the spending really is—but so far, all signs points to continued overwhelming demand, leading not just to big growth now but massive increases in future orders and backlog. That, in a nutshell, is why Vertiv, after a long period of ups and downs, has re-emerged on the upside: The firm is a leader in liquid cooling systems, power management offerings and even rack and IT systems, all of which are key to building the latest, most advanced data centers. Business has been good for a while, but the Q4 report in February didn’t just trounce expectations but showed the next couple of years should remain buoyant: In Q4, sales (up 23%, though they were up 46% in the Americas, where most of the action is) and earnings (up 37%) continued their solid growth trends, but the real eye-opener came on the order side, with organic orders up a ridiculous 252% from a year ago, a book-to-bill ratio of 2.9 (that is, 2.9x as many orders as output), all of which drove the year-end backlog to $15 billion, up 109% from Q4 2024. And despite the order boom last year, the top brass expects order totals to grow again in 2026 given the indications they’re getting, and with higher prices, too. The end result is that earnings should leap over $6 per share this year (up 45%) and to north of $8 in 2027, and of course that could prove conservative if the hyperscalers keep at it. In terms of risks, there has been the occasional competition concerns—a rumor Amazon would make its own cooling system hit the stock last summer—but Vertiv’s close collaborations with many major players means any real threat is unlikely for many quarters. As alluded to above, the stock didn’t make much net progress from November 2024 through January of this year, but VRT gapped to new highs on earnings and has continued to trade resiliently despite the market’s best efforts at bringing it down.
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About Cabot Wealth Network
This report is published by Cabot Wealth Network which was founded in 1970 by Carlton Lutts, a disciplined investor with an engineering mind who developed a proprietary stock picking system using technical and fundamental analyses.
Since then Cabot Wealth Network, headquartered in Salem, Massachusetts, has grown to become one of the largest and most-trusted independent investment advisory publishers in the country, serving hundreds of thousands of investors across North America and around the world.
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