ClearBridge Dividend Strategy's Review of its Investment in Oracle (ORCL)

ClearBridge Investments, an investment management company, released its “ClearBridge Dividend Strategy” fourth-quarter 2025 investor letter. The strategy focuses on generating high current income, income growth, and capital preservation by investing in high-quality large-cap companies that offer attractive dividends and potential for significant dividend growth. A copy of the letter can be downloaded here. The market continued its high degree of concentration in the fourth quarter of 2025. This is the third consecutive year of an AI-driven market. The market-cap-weighted S&P 500 Index returned 17.9% while the equal-weighted S&P 500 Index gained just 11.4% in the year. In this environment, the strategy also enjoyed significant gains due to its exposure to AI participants. However, the strategy underperformed its S&P 500 Index benchmark during the fourth quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, ClearBridge Dividend Strategy highlighted stocks such as Oracle Corporation (NYSE:ORCL). Oracle Corporation (NYSE:ORCL) offers products and services that address enterprise information technology environments. The one-month return of Oracle Corporation (NYSE:ORCL) was -3.02%, and its shares gained 18.21% of their value over the last 52 weeks. On January 7, 2026, Oracle Corporation (NYSE:ORCL) stock closed at $192.84 per share, with a market capitalization of $554.054 billion.

ClearBridge Dividend Strategy stated the following regarding Oracle Corporation (NYSE:ORCL) in its fourth quarter 2025 investor letter:

"With several leading AI companies now sporting multitrillion-dollar valuations, it is clear they reflect lofty expectations. As their prices rise and valuation multiples expand, the investment case evolves and can become less favorable. A brief review of our investments in Oracle Corporation (NYSE:ORCL) and Broadcom illustrates how we approach this type of environment. While both stocks surged in 2025, we significantly reduced our position in Oracle, while largely maintaining our position in Broadcom.

Throughout the first nine months of the year, the market cheered each time Oracle announced a new, large data center contract. By year end, however, investors worried whether Oracle’s huge construction backlog represented too much of a good thing. These data center contracts require the company to spend hundreds of billions of dollars, a potentially risky endeavor that represents a profound shift in its business model.

Oracle grew up as a software company, enjoying high profit margins and returns on invested capital, due to the negligible capital requirements of the software business. The AI data center business, by contrast, is phenomenally capital intensive, yet offers lower margins and returns. Further, despite Oracle’s size, the required expenditures strain its balance sheet and raise concerns about the sustainability of its investment-grade credit rating. With its shares surging despite this increasingly complex outlook, we meaningfully reduced the position to reflect the evolving risk-reward. We continue to hold a modest position, however, as we balance the risks of the company’s business model evolution with the potential for years of extraordinary top-line growth."

Oracle Corporation (NYSE:ORCL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 122 hedge fund portfolios held Oracle Corporation (NYSE:ORCL) at the end of the third quarter, which was 124 in the previous quarter. In the second quarter of fiscal 2026, Oracle Corporation (NYSE:ORCL) reported total revenues of $16.1 billion, up 14% compared to last year’s comparable quarter. While we acknowledge the potential of Oracle Corporation (NYSE:ORCL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Oracle Corporation (NYSE:ORCL) and shared the list of stocks Jim Cramer recently discussed. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.