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The quietly surging stock that’s been in the market’s sweet spot

One of the best-performing stocks in the S&P 500 is a little-followed company called Digital Realty.

As a real estate investment trust that deals with technology-related real estate, it has benefited from both the rise in cloud computing and from low interest rates.

And as stocks hit all-time highs, Digital Realty has been one of the best performers since May 2015, when the S&P was last at these levels, rising nearly 70 percent in that time.

Like all REITs, Digital Realty invests in real estate and passes along the vast majority of income to its investors. But instead of leasing out office space or apartment buildings, this company leases out data centers to provide infrastructure for cloud platform services. Companies like Amazon and Microsoft are among its clients.

As more people start using cloud services, data center REITs, like Digital Realty, Equinix and CoreSite Realty, are in high demand, said Jordan Sadler, analyst with KeyBanc Capital Markets. The increased demand for mobile data and mobile streaming video also adds to the company's growth.

"They are headed in the direction to become a more global interconnected platform of wholesale retail data centers," Sadler told CNBC on Tuesday. He added that data center REITs overall are up an average of 40 percent.

Although the company has benefited from the general direction of the industry, it has also made some internal changes to try to boost the business, Sadler said. The company is looking to expand into the business of co-location and interconnection. One step in that direction was the acquisition of a company called Telx in October.

In its first quarter earnings for 2016, released on April 28, Digital Realty reported revenues of $504 million, a 1 percent increase from the previous quarter and a 24 percent increase over the same quarter last year.

In a April press release about earnings, Chief Executive Officer A. William Stein said "data center demand remains robust, driven by a rapidly growing trend towards corporate IT outsourcing. Our activity in Germany and Japan underscores the importance of scale and a global platform in providing data center solutions to meet customers' needs around the world."

Sadler said this is one way for investors to play the buildout of web services by larger companies like Amazon and Microsoft, which Digital Realty "directly and indirectly" benefits from.

Digital Realty also benefited from continued low interest rates, because as interest rates fall, high-yielding equities such as REITs tend to rise.

"Given the low interest rates, these stocks are also viewed as great alternative yield instruments," Evercore ISI Jonathan Schildkraut wrote in an email.

Boris Schlossberg, a trader and strategist with BK Asset Management, said as long as the global central bank posture remains "neutral to dovish," Digital Realty should continue to outperform.

"Buy them you must because until the interest rate posture changes I really think all of these things can easily outperform," Schlossberg said Monday on CNBC's "Trading Nation." "You have to stay bullish on this company because they're in the right space."

Craig Johnson, technical analyst with Piper Jaffray, said this is a stock to hold but not something to put more money into.

"I'm going to be waiting for some sort of pullback. Perhaps there's going to be some indication of higher rates in the future and maybe that's going to create an opportunity to buy this stock at a little bit of a lower price," Johnson said on "Trading Nation."

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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