Here's Why DraftKings (DKNG) Was Exited Amid Rising Competitive Risks

ClearBridge Investments, an investment management company, released its “ClearBridge Mid Cap Strategy” Q4 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the ClearBridge Mid Cap Strategy reported underperformance versus the Russell Midcap Index, which returned 0.16% during the period, as narrow market leadership and sentiment-driven trading weighed on results. Weakness in information technology and real estate holdings pressured returns, while gains in select consumer discretionary stocks provided partial support. The firm noted that elevated dispersion and uneven earnings reactions continued to shape mid-cap equity performance during the quarter. Looking ahead, the portfolio management team expressed cautious optimism, noting that improving clarity around policy, interest rates, and business investment could create a more favorable backdrop for active stock selection, particularly as valuation gaps widen and fundamentals across many mid-cap companies continue to strengthen. In addition, please check the fund’s top five holdings to know its best picks in 2025.

DraftKings Inc. (NASDAQ:DKNG) operates a digital sports betting and online gaming platform, offering wagering, fantasy sports, and iGaming products across regulated markets. The one-month return of DraftKings Inc. (NASDAQ:DKNG) was -12.51% while its shares have traded between $26.23 to $53.61 over the last 52 weeks. On January 26, 2026, DraftKings Inc. (NASDAQ:DKNG) stock closed at approximately $30.58 per share, with a market capitalization of about $15.15 billion.

ClearBridge Investments, an investment management company, stated the following regarding DraftKings Inc. (NASDAQ:DKNG) in its “ClearBridge Mid Cap Strategy” Q4 2025 investor letter:

"We also exited DraftKings Inc. (NASDAQ:DKNG), a digital sports betting and gaming platform, as the rise of prediction markets introduced additional competitive uncertainty that altered our conviction in the company’s medium-term business model."

DraftKings Inc. (NASDAQ:DKNG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 68 hedge fund portfolios held DraftKings Inc. (NASDAQ:DKNG) at the end of the third quarter, which was 66 in the previous quarter. While we acknowledge the risk and potential of DraftKings Inc. (NASDAQ:DKNG) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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 DraftKings Inc. (NASDAQ:DKNG) and shared the list of stocks under $50 to buy. 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.