By Michael Cintolo, Vice President of Investments, Cabot Wealth Network
Datadog (DDOG)
Datadog is becoming the observability-and-security control layer for AI-era infrastructure, giving enterprises a centralized platform to monitor applications, cloud workloads, cybersecurity events and increasingly complex AI systems across various tech and cloud environments. The company benefits from a structural shift in enterprise computing: Large firms today have so many different pieces of software that are super data-intensive that using a bunch of different monitoring tools becomes a nightmare (and often doesn’t work that well)—instead, big clients prefer a unified platform, which both makes life easier and boosts performance optimization and security. Of course, there’s an AI angel here too, as the boom in AI workloads requires continuous telemetry (data collection for analysis), cost monitoring and threat detection. Datadog’s competitive advantage comes from its cloud-native architecture, deep integrations with AWS, Microsoft Azure and Google Cloud, and its ability to consolidate infrastructure monitoring, application performance, logs, cloud security and AI observability into a single system, which not only attracts new customers but makes it hard for them to leave once they standardize on the platform. Its latest earnings report reinforced that AI-related demand is accelerating, with Q1 revenue rising 32% while annualized recurring revenue surpassed $4 billion for the first time. Large-customer momentum remained especially strong, including continued growth in six-, seven- and eight-figure deals, largely tied to AI infrastructure deployments. To be fair, margins have been shrinking due to heavy investments (earnings are growing slower than sales), but the big idea here is that observability is becoming a must-have, which means Datadog should continue to benefit as the era of AI inferencing and using (not just training) picks up steam among current and new clients. DDOG had a couple of false starts on the upside during the past two years, but the reaction to the Q1 report looks decisive, with the stock motoring to new highs and following through nicely on the upside. As with most strong stocks, a near-term pothole is possible, but the path of least resistance has turned up.
Intel (INTC)
Back when I first started at Cabot in 1999, Intel was already behind the curve during the Internet bubble—and a quarter-century later, not much had changed, with run-of-the-mill chips for computers and servers selling poorly and causing earnings to plunge into the red. All told, the stock fell around 75% from its 2000 peak to its lows last year! However, AI has come to the rescue, but this is not a clone of Nvidia or Broadcom that feeds into the training of large models—instead, Intel has become another play on the move toward inferencing and agentic AI, where trained models perform all sorts of semi- or fully automated tasks, and the data orchestration and scheduling needed demand more CPUs … so much so that demand is off the charts. Indeed, Intel thinks that the GPU (which are used to train AI systems) to CPU ratio could fall from 8:1 in the heyday of AI training all the way to 2:1 or 1:1 as agentic AI picks up steam. To be fair, there’s some company-specific reasons for the firm’s success here, too, the biggest of which is a new CEO that took over last summer, slashed the workforce and spending levels and focused on AI demand, which is paying off in a big way. Growth here isn’t overly rapid, but the Q1 report blew away expectations: Sales rose 7%, which was a big 10% above estimates, with earnings of 29 cents vs. expectations of just a penny or two—and management said results could have been much higher if it could have fulfilled demand, which is one reason it’s rapidly expanding capacity and inking deals with big firms (like Google and Tesla) for current and future AI-related CPUs. Analysts see earnings more than doubling this year to over $1 per share and hitting nearly $1.50 next, but most see those figures as conservative and likely to lead to even higher figures down the road. INTC has gone vertical since the market bottom as investor perception races higher; it likely needs to rest a bit, but we’re thinking the odds strongly favor any near-term wobbles giving way to meaningfully higher prices.
Liquidia (LQDA)
Liquidia is another small, one-drug biotech outfit, which obviously carries some risk; the stock isn’t meant for the rent money. But that one drug looks special, quickly taking share from a bigger competitor in a large potential market. Dubbed Yutrepia, the drug treats pulmonary arterial hypertension (PAH) and interstitial lung disease (PH-ILD), which combined are a $6 billion opportunity. United Therapeutics (UTHR) has historically made hay in this field with its blockbuster Tyvaso, and, interestingly, both that and Yutrepia use the same active drug; the difference comes in how the drugs are delivered. Tyvaso historically used to be given via a cumbersome nebulizer four times per day, though now there’s an inhaled version that’s improved the process but can still require many cartridges a day for patients who need a lot of medicine. But Yutrepia is even better: It’s also inhaled, but using Liquidia’s PRINT technology, it forms the dry powder into uniform particles of a certain shape, resulting in more of the drug getting into the lungs and doing its job, so the treatment is not just more convenient but also more effective, especially for those with PH-ILD. (The firm’s PRINT technology could be a lucrative long-term platform for inhaled medications, too.) Not surprisingly, Liquidia has been rapidly taking share: In Q1, while Tyvaso’s sales dipped 2% and totaled $458 million (that includes both nebulizer and inhaled versions), Yutrepia brought in $130 million in just its third quarter on the market, up 44% from the December quarter! Even more impressive for investors is that Liquidia is doing this while gushing cash: Earnings have been in the black the past two quarters, and analysts see upside from here, with earnings of $3.35 per share this year and north of $5 next, and even that could prove too low given how Yutrepia has been trouncing expectations. To be fair, this story will likely remain driven by PAH/PH-ILD for a while (any new drug submissions likely won’t be coming until 2027 or 2028), and United is engaged in some legal battle with Liquidia, with one patent-related case set for a judge’s opinion soon; Liquidia is very optimistic about the outcome, but that’s always a risk. But investors aren’t phased, with shares exploding out of a three-month rest after Q1 earnings and refusing to give up an inch. It’s a good story with big potential if things go right.
Marex (MRX)
Marex is a classic Bull Market stock (a firm whose fortunes rise when markets of all types are doing well), building a global market-infrastructure platform that provides liquidity, clearing, execution, hedging and data analytics across energy, metals, agriculture, fixed income, foreign exchange and financial derivatives to more than 60 exchanges globally. (Half of the business is in the Americas, but half is international.) The firm’s clearing and brokerage services make up about 80% of its pre-tax profit, and these areas tend to lead to higher-margin, recurring revenue; market-making and hedging solutions make up the rest. Indeed, a big draw here is the firm’s global reach and the fact that it operates in so many areas, both of which aren’t easily replicated. Not surprisingly, Marex has been gaining share from existing clients (cross-selling to new services, etc.)—indeed, while total clients lifted by 19% last year, the firm’s largest cohort grew 36%, while the revenue per client metric of that larger group boomed 83%. Combined with the aforementioned recurring-type businesses, margins are headed higher (20.7% pre-tax profit margins last, with management targeting “mid-20%s” within three to five years), taking earnings along with it, with some bolt-on M&A (six buyouts last year) also helping the cause. The numbers are fantastic: Sales and earnings growth are both accelerating (increased volatility in recent months helped with activity, while interest income is a contributor, so fewer rate cuts is helping), and while growth is likely to slow in the coming quarters, Wall Street sees earnings up 30% for 2026 as a whole, with the top brass looking for mid-teens long-term expansion in the bottom line. Obviously, the overall investing environment will be key, but Marex looks like a winner given the positive big-picture tidings in the market. Indeed, after a big base-building effort, MRX broke out on the upside on huge volume in March and April, with a May rest likely setting the stage for higher prices ahead.
Travere Therapeutics (TVTX)
It’s not running away on the upside at this point, but we’re seeing a few biotech names out there that are set up nicely after a few months of base-building and have big sales and earnings outlooks thanks to some new, innovative drugs. Travere is a smaller name (market cap of $3.8 billion) but it has a huge success on its hands: Dubbed Filspari, its drug uses a unique approach (targets two receptors to reduce protein buildup and does not target the immune system) to target certain kidney diseases that, if not treated, can progress to end-stage renal disease (kidney failure) and require dialysis or a transplant. Taken orally once a day, the drug has shown great results (including possibly delaying the need for dialysis or transplant by four-plus years) when treating IaGN (full approval in September 2024), a chronic kidney disease caused by a build-up of antibody deposits; there is competition in the space from Novartis and others, but Falspari is the only one that doesn’t specifically target the immune system. Sales for this indication were $103 million in Q4, up 108%, but the top brass thinks this is a $1 billion-plus opportunity down the road. But the real excitement concerns FSGS, which is when the kidney filtering units are scarred; there are more than 4,000 people on the kidney transplant wait list due to FSGS, with 33,000 kids and adults currently experiencing some form of kidney failure. After some uncertainty, Filspari got approval just a few weeks ago, the first FDA-approved treatment for this indication and a big improvement over just waiting for a transplant or staying on dialysis for months—and analysts think it could be a big seller, with $2 billion-plus annual sales potential within a few years. The near-term question is how fast Travere can ramp Filspari in the new indication, but timing aside, it’s a very good bet that the company is going to get a lot bigger going forward: Wall Street sees sales up 40% or so both this year and next, with earnings taking off soon (the bottom line was in the black in Q4, but might step back with initial new launch costs). As for the stock, it had a nice run into February before a wild selloff as the FDA said it needed more time to review the FSGS indication—but shares did hold long-term support and then gapped back to where they were after the official approval. It’s a bit on the small side, but we think the recent strength should lead to upside follow-through.
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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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