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<title>The Navigator: Crowded House</title>
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<!---->
<!--[if !gte mso 9]><!----><span class="mcnPreviewText" style="display:none; font-size:0px; line-height:0px; max-height:0px; max-width:0px; opacity:0; overflow:hidden; visibility:hidden; mso-hide:all;">Never before have US equity markets been so accessible – or so crowded.</span><!--<![endif]-->
<!---->
<div style="display: none; max-height: 0px; overflow: hidden;">͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ </div><!--MCE_TRACKING_PIXEL-->
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<!--[if mso]>
<span class="mceImageBorder" style="border:0;vertical-align:top;margin:0"><img role="presentation" class="imageDropZone mceImage" src="https://mcusercontent.com/cdd951e6a7a08b835a0f38a3f/images/dcd22325-dae6-287e-01f9-8a9f958ab216.png" alt="" width="660" height="auto" style="display:block;max-width:660px;width:660px;height:auto"/></span>
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</div></td></tr><tr><td style="padding-top:0;padding-bottom:0;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" id="b8"><table width="100%" style="border:0;border-radius:0;border-collapse:separate"><tbody><tr><td style="padding-left:24px;padding-right:24px;padding-top:12px;padding-bottom:12px" class="mceTextBlockContainer"><div data-block-id="8" class="mceText" id="d8" style="width:100%"><h4><strong>Never before have US equity markets been so accessible – or so crowded. Twenty years ago, around 4 billion shares were traded daily across US stock markets. Today, it’s over 15 billion. Yet long-term investment managers like Orbis, Baillie Gifford, and Dodge & Cox account for only a fraction of that activity, and their share is shrinking.</strong></h4><p><br></p><p>The surge in trading activity and the influx of new participants have made markets more complex and unpredictable. Stock prices now react sharply, even to seemingly minor news. Pinpointing the drivers of short-term price movements has never been easy, and today it’s harder than ever.</p><p><br></p><p>The total value of US stocks traded in 2024 reached $50 trillion, more than double the 2014 figure. But this explosion in trading volume isn’t being driven by long-term investment managers. So who is behind it? And what does it mean for those who still invest with a long-term lens?</p><p><br></p><h4><strong>New Players in the Market</strong></h4><p>Over the past two decades, four new types of participants have come to dominate US equity trading, crowding out the long-term, valuation-driven investors who once held far more sway.</p><p><br></p><p>These new players typically have short time horizons and are less focused on company fundamentals - the financial health and business strength that determine a company’s long-term value. That’s a stark contrast to long-term managers who buy undervalued companies and hold them until their true worth is recognised.</p><p><br></p><p class="last-child"><strong>Let’s take a closer look:</strong></p></div></td></tr></tbody></table></td></tr><tr><td style="padding-top:12px;padding-bottom:12px;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" class="mceImageBlockContainer" align="center" id="b35"><div><!--[if !mso]><!--></div><table align="center" border="0" cellpadding="0" cellspacing="0" width="93%" style="border-collapse:separate;margin:0;vertical-align:top;max-width:93%;width:93%;height:auto" role="presentation" data-testid="image-35"><tbody><tr><td style="border:0;border-radius:0;margin:0" valign="top"><img alt="" src="https://mcusercontent.com/cdd951e6a7a08b835a0f38a3f/images/525bbb16-4aec-95d8-f7ca-fd5cb4b761a1.png" width="613.8000000000001" height="auto" style="display:block;max-width:100%;height:auto;border-radius:0" class="imageDropZone mceImage" data-block-id="35"></td></tr></tbody></table><div><!--<![endif]--></div><div>
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</div></td></tr><tr><td valign="top" class="mceGutterContainer" id="gutterContainerId-40"><table border="0" cellpadding="0" cellspacing="0" width="100%" style="border-collapse:separate" role="presentation"><tbody><tr><td style="padding-top:8px;padding-bottom:8px;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" class="mceLayoutContainer" id="b40"><table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation" data-block-id="40" id="section_92fada472658ee7f0dfe915b8974301d" class="mceLayout"><tbody><tr class="mceRow"><td style="background-position:center;background-repeat:no-repeat;background-size:cover" valign="top"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td valign="top" class="mceColumn" id="mceColumnId--13" data-block-id="-13" colspan="12" width="100%"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="border:0;border-radius:0" valign="top" align="center" id="b-8"><table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation" data-block-id="-8"><tbody><tr class="mceRow"><td style="background-position:center;background-repeat:no-repeat;background-size:cover" valign="top"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td valign="top" class="mceColumn" id="mceColumnId--14" data-block-id="-14" colspan="12" width="100%"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="border:0;border-radius:0" valign="top" id="b39"><table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation" data-block-id="39"><tbody><tr class="mceRow"><td style="background-position:center;background-repeat:no-repeat;background-size:cover" valign="top"><table border="0" cellpadding="0" cellspacing="24" width="100%" role="presentation"><tbody><tr><td style="padding-top:0;padding-bottom:0" valign="top" class="mceColumn" id="mceColumnId-38" data-block-id="38" colspan="12" width="100%"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="padding-top:0;padding-bottom:0;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" id="b9"><table width="100%" style="border:0;border-radius:0;border-collapse:separate"><tbody><tr><td style="padding-left:24px;padding-right:24px;padding-top:12px;padding-bottom:12px" class="mceTextBlockContainer"><div data-block-id="9" class="mceText" id="d9" style="width:100%"><ul><li><p>Passive investing has ballooned in the US. Today, passive is bigger than active, accounting for over 50% of equity fund assets globally.</p></li><li><p>Likewise, high-frequency trading has expanded with technological advancements that allow these participants to buy and sell stocks extremely quickly, often within milliseconds.</p></li><li><p>Pod shops deserve special mention. These are hedge funds structured into multiple autonomous teams (or “pods”) each with its own portfolio manager, analysts, and trading strategy. While they operate under a shared umbrella, each pod operates like a mini hedge fund, competing internally for capital. Their use of leverage and rapid-fire trading across sectors makes them a significant and sometimes destabilising force in today’s markets.</p></li><li><p>Over the past decade in particular, retail trading has risen in popularity. Easily accessible, low-cost platforms have become popular ways for novice investors to buy and sell stocks. In 2024, retail traders account for 17% of trading activity in the US. This is almost double what it was a decade ago.</p><p><br></p></li></ul><p>These four participants account for the majority of trading on the US stock market and their presence is being felt.</p><p><br></p><h4><strong>Three Key Effects on Markets</strong></h4><p><br></p><ol><li><p><strong>More Liquidity, but Not Always When It Counts</strong></p><p>More participants mean more liquidity, in other words, it’s easier and cheaper to buy and sell shares. Since the 1990s, the average cost of trading US stocks has dropped by about 80%. That’s helped make markets more accessible: in 2014, there were 90 million individual investor accounts in the US; by 2024, there were over 200 million.<br></p><p>But liquidity becomes a problem during market stress. When many participants follow similar strategies, they often sell at the same time, draining liquidity just when it’s needed most. This can make it harder for investors to exit positions without affecting prices.<br></p></li><li><p><strong>Increased Volatility</strong></p><p>Short-term traders react quickly to news, creating more price swings. Meanwhile, the decline of long-term investors has removed a stabilising force. Traditionally, these investors buy when prices fall and sell when they rise, helping to smooth volatility. Without them markets can fall (or rise) further and faster.<br></p><p>The COVID crash and “Liberation Day” (President Donald Trump’s 2 April 2025 tariff announcement) are examples of how markets can move sharply when short-term players dominate. These events showed how quickly sentiment can shift, and how little it sometimes takes to trigger large moves. This is illustrated in the chart below, which shows how much the S&P 500 moved from its lowest to highest point within a single trading day, highlighting just how extreme market swings can be during periods of heightened uncertainty.</p><p><br></p></li></ol><h4 class="last-child"><strong>S&P 500 Low-to-High Swing</strong></h4></div></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr><tr><td style="padding-top:12px;padding-bottom:12px;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" class="mceImageBlockContainer" align="center" id="b31"><div><!--[if !mso]><!--></div><table align="center" border="0" cellpadding="0" cellspacing="0" width="93%" style="border-collapse:separate;margin:0;vertical-align:top;max-width:93%;width:93%;height:auto" role="presentation" data-testid="image-31"><tbody><tr><td style="border:0;border-radius:0;margin:0" valign="top"><img alt="" src="https://mcusercontent.com/cdd951e6a7a08b835a0f38a3f/images/ee8fb1af-f100-9fb8-f447-2757b7bcda90.jpg" width="613.8000000000001" height="auto" style="display:block;max-width:100%;height:auto;border-radius:0" class="imageDropZone mceImage" data-block-id="31"></td></tr></tbody></table><div><!--<![endif]--></div><div>
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</div></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table></td></tr></tbody></table><!--[if (gte mso 9)|(IE)]></td></tr></table><![endif]--></td></tr></tbody><tbody data-block-id="21" class="mceWrapper"><tr><td style="background-color:transparent" valign="top" align="center" class="mceSectionFooter"><!--[if (gte mso 9)|(IE)]><table align="center" border="0" cellspacing="0" cellpadding="0" width="660" style="width:660px;"><tr><td><![endif]--><table border="0" cellpadding="0" cellspacing="0" width="100%" style="max-width:660px" role="presentation"><tbody><tr><td style="background-color:#ffffff" valign="top" class="mceWrapperInner"><table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation" data-block-id="20"><tbody><tr class="mceRow"><td style="background-position:center;background-repeat:no-repeat;background-size:cover" valign="top"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="padding-top:0;padding-bottom:0" valign="top" class="mceColumn" id="mceColumnId--12" data-block-id="-12" colspan="12" width="100%"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="padding-top:0;padding-bottom:0;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" id="b41"><table width="100%" style="border:0;border-radius:0;border-collapse:separate"><tbody><tr><td style="padding-left:24px;padding-right:24px;padding-top:0;padding-bottom:12px" class="mceTextBlockContainer"><div data-block-id="41" class="mceText" id="d41" style="width:100%"><p style="line-height: 1; mso-line-height-alt: 100%;" class="last-child"><em><span style="color:rgb(0, 0, 0);"><span style="font-size: 8pt"><span style="font-family: Lato, sans-serif">Source: Bloomberg, as of 14 April 2025; provided by Sands Capital and adapted by Fundhouse</span></span></span></em></p></div></td></tr></tbody></table></td></tr><tr><td style="padding-top:0;padding-bottom:0;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" id="b32"><table width="100%" style="border:0;border-radius:0;border-collapse:separate"><tbody><tr><td style="padding-left:24px;padding-right:24px;padding-top:12px;padding-bottom:12px" class="mceTextBlockContainer"><div data-block-id="32" class="mceText" id="d32" style="width:100%"><ol start="3"><li><p>Behavioural Biases</p><p>Many new participants exhibit herd behaviour, when investors follow the crowd rather than their own analysis. Pod shops and retail traders often buy stocks that have recently gone up, the opposite of long-term investors, who tend to buy what’s out of favour.</p><p><br>This momentum, when rising prices attract more buyers, can inflate prices far beyond fair value. US listed company GameStop’s 2021 rally driven by retail investors pushing the stock price higher and higher, is a pertinent example of this behaviour. For everyday investors, this can feel like a missed opportunity — or a temptation to jump in late. But when prices are driven more by popularity than fundamentals, the risk of buying high and selling low increases.</p></li></ol><p><br></p><h4><strong>Long-Term Investing: Out of Fashion, but Still Powerful</strong></h4><p>Excessive trading, short-term thinking and herding don’t align with the principles of long-term investing. Long term investment managers take a different approach: they buy companies with strong fundamentals when they’re undervalued and hold them until the market catches up.</p><p><br></p><p><strong>But today’s market structure presents new challenges:</strong></p><ul><li><p><strong>Sharp price moves: </strong>Stocks can drop 10% in a day for missing earnings expectations (what analysts predict a company will earn).</p></li><li><p><strong>Valuation drift: </strong>When fewer investors focus on fundamentals, prices can drift away from a company’s true worth — and stay there. While this is frustrating, it also creates opportunity: when sentiment eventually shifts, quality businesses can re-rate quickly.</p></li><li><p><strong>Overreactions to news: </strong>Markets can lose trillions and recover in days. After the “Liberation Day” tariff announcement, US markets lost nearly $6 trillion, only to bounce back shortly after.</p><p><br></p></li></ul><p>Despite these challenges, long-term investing may be more attractive than ever. With fewer participants focused on fundamentals, there’s more room for skilled managers to find stocks that are trading at prices that don’t reflect their true value.</p><p><br></p><p>This is why many of the managers we rate highly continue to focus on long-term fundamentals. They’re not ignoring the noise, they’re choosing not to react to it. Often, they act as a counterbalance to market trends: buying when others are selling, and seeking value when others chase momentum. This contrarian approach can be uncomfortable in the short term, but rewarding over time.</p><p><br></p><h4><strong>The Long View</strong></h4><p>The US equity market may feel crowded, noisy and fast-moving but that doesn’t mean you have to be. The rise of AI-powered strategies and short-term trading has changed the rhythm of the market. Thoughtful, long-term investing has become rarer and more valuable. Maintaining a level head, a long-time horizon, and a focus on fundamentals is becoming an increasingly scarce and attractive way to generate compelling returns. Resisting the urge to react to every market movement is one of the most powerful advantages an investor can have. It’s not always easy, but it’s often worth it.</p><p class="last-child"><br></p></div></td></tr></tbody></table></td></tr><tr><td style="background-color:#f4f4f4;padding-top:8px;padding-bottom:8px;padding-right:8px;padding-left:8px;border:0;border-radius:0" valign="top" class="mceLayoutContainer" id="b19"><table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation" data-block-id="19" id="section_da3651728a0dd8bd33db0b2d55b74f62" class="mceFooterSection"><tbody><tr class="mceRow"><td style="background-position:center;background-repeat:no-repeat;background-size:cover" valign="top"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td valign="top" class="mceColumn" id="mceColumnId--11" data-block-id="-11" colspan="12" width="100%"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="border:0;border-radius:0" valign="top" align="center" id="b-6"><table align="center" border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation" data-block-id="-6"><tbody><tr class="mceRow"><td style="background-position:center;background-repeat:no-repeat;background-size:cover;padding-top:0px;padding-bottom:0px" valign="top"><table border="0" cellpadding="0" cellspacing="24" width="100%" style="table-layout:fixed" role="presentation"><colgroup><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"><col span="1" width="8.333333333333332%"></colgroup><tbody><tr><td style="padding-top:0;padding-bottom:0" valign="top" class="mceColumn" id="mceColumnId--2" data-block-id="-2" colspan="6" width="50%"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="padding-top:0;padding-bottom:0;padding-right:0;padding-left:0;border:0;border-radius:0" valign="top" id="b17"><table width="100%" style="border:0;border-radius:0;border-collapse:separate"><tbody><tr><td style="padding-left:16px;padding-right:16px;padding-top:12px;padding-bottom:12px" class="mceTextBlockContainer"><div data-block-id="17" class="mceText" id="d17" style="width:100%"><p style="text-align: left;" class="last-child"><a href="https://mailchi.mp/b9bedc11025d/the-navigator-there-is-always-the-next-big-thing-17452834?e=[UNIQID]"><span style="font-size: 11px">View email in browser</span></a><span style="font-size: 11px"><br>Steward Capital (Pty) Ltd. · 1 Nollsworth Park, Nollsworth Crescent · La Lucia Ridge · Durban, KwaZulu-Natal 4051 · South Africa<br></span><a href="https://stewardcapital.us19.list-manage.com/profile?u=cdd951e6a7a08b835a0f38a3f&id=e7c35e7601&e=[UNIQID]&c=00568b64bb"><span style="font-size: 11px">update your preferences</span></a><span style="font-size: 11px"> or </span><a href="https://stewardcapital.us19.list-manage.com/unsubscribe?u=cdd951e6a7a08b835a0f38a3f&id=e7c35e7601&t=b&e=[UNIQID]&c=00568b64bb"><span style="font-size: 11px">unsubscribe</span></a></p></div></td></tr></tbody></table></td></tr></tbody></table></td><td style="padding-top:0;padding-bottom:0" valign="top" class="mceColumn" id="mceColumnId--3" data-block-id="-3" colspan="6" width="50%"><table border="0" cellpadding="0" cellspacing="0" width="100%" role="presentation"><tbody><tr><td style="padding-top:12px;padding-bottom:12px;padding-right:48px;padding-left:48px;border:0;border-radius:0" valign="top" class="mceImageBlockContainer" align="left" id="b16"><div><!--[if !mso]><!--></div><a href="https://www.stewardcapital.co.za" style="display:block" target="_blank" data-block-id="16"><table align="left" border="0" cellpadding="0" cellspacing="0" width="100%" style="border-collapse:separate;margin:0;vertical-align:top;max-width:198.9px;width:100%;height:auto" role="presentation" data-testid="image-16"><tbody><tr><td style="border:0;border-radius:0;margin:0" valign="top"><img alt="logo" src="https://mcusercontent.com/cdd951e6a7a08b835a0f38a3f/images/e5a2bac3-cf59-a62d-af80-a6bfe7c72ee6.png" width="198.9" height="auto" style="display:block;max-width:100%;height:auto;border-radius:0" class="mceLogo"></td></tr></tbody></table></a><div><!--<![endif]--></div><div>
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