Meridian Hedged Equity Fund Remains Confident in DraftKings’ (DKNG) Earnings Outlook

DKNG +2.74% ^GSPC +0.56% CBOE +0.42%

Meridian Funds, managed by ArrowMark Partners, released its fourth-quarter 2025 investor letter for “Meridian Hedged Equity Fund”. A copy of the letter can be downloaded here. U.S. equity markets experienced a quarter supported by optimism about potential monetary easing and caution regarding economic growth and valuations. Early gains were driven by strong AI-related earnings and the US Federal Reserve’s rate cut in October, which improved expectations for financial conditions. However, market sentiment cooled later in the quarter. Despite this moderation, the quarter contributed positively to robust annual results. In Q4 2025, the Fund gained 0.08% compared to the S&P 500 Index’s 2.66% return and its secondary benchmark, the CBOE S&P 500 BuyWrite Index’s 6.53% return. As the market heads into 2026, the firm is closely watching factors that may affect market returns, including monetary policy and the sustainability of AI investments in the face of high valuations. In this environment, the firm continues its disciplined, bottom-up fundamental research and prudent risk management. In addition, please check the Fund’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Meridian Hedged Equity Fund highlighted stocks like DraftKings Inc. (NASDAQ:DKNG). DraftKings Inc. (NASDAQ:DKNG) is an American digital sports entertainment and gaming company. On February 13, 2026, DraftKings Inc. (NASDAQ:DKNG) stock closed at $21.76 per share. One-month return of DraftKings Inc. (NASDAQ:DKNG) was -33.29%, and its shares are down 59.32% over the past twelve months. DraftKings Inc. (NASDAQ:DKNG) has a market capitalization of $10.832 billion.

Meridian Hedged Equity Fund stated the following regarding DraftKings Inc. (NASDAQ:DKNG) in its fourth quarter 2025 investor letter:

"DraftKings Inc. (NASDAQ:DKNG) is a leading digital entertainment company offering online sports betting, fantasy sports, and gaming services. As a market leader, the company is positioned to benefit from continued growth in online wagering through strong user engagement and ongoing product innovation. Shares declined during the quarter after earnings fell short of expectations and management reduced forward guidance, reflecting unfavorable betting outcomes and competitive pressures. The company is pursuing expansion into adjacent prediction markets through acquisition, broadening its addressable opportunity, while increasing its share repurchase authorization to support shareholder value. Despite near-term pressures, we believe DraftKings’ earnings potential remains intact."

DraftKings Inc. (NASDAQ:DKNG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 68 hedge fund portfolios held DraftKings Inc. (NASDAQ:DKNG) at the end of the third quarter, up from 66 in the previous quarter. While we acknowledge the potential of DraftKings Inc. (NASDAQ:DKNG) 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 DraftKings Inc. (NASDAQ:DKNG) and shared a list of best stocks under $50 to invest in. 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.