Large Cap 1000 Stock Screen Backtest
Monday, January 26, 2015 · Tobias Carlisle
Updated November 29, 2017
Since the last update in July 26, 2016, the screen had a strong finish to end the 2016 year up 27.4 percent, handily beating out the Russell 1000’s 15.1 percent by 12.3 percent.
2017 to date has seen continued large cap strength. For the year, the Large Cap Screen’s 18.8 percent has outperformed the Russell 1000’s 16.9 percent by 1.9 percent.
Chart 1. Returns from January 2, 1999 to Date (Log.)
We backtested the returns to a theoretical portfolio of stocks selected by The Acquirer’s Multiple® from the Large Cap 1000 screen. The backtest assumed the screen bought and held for a year 30 stocks selected from the large cap universe (the largest 1,000 stocks by market capitalization). The screens were rebalanced on the first day of the year using the most recent fundamental data. The backtest ran from January 2, 1999 to date.
Over the full period, the screen generated a total return of 2,797 percent, or a compound growth rate (CAGR) of 19.3 percent per year. This compared favorably with the Russell 1000 Total Return, which returned a cumulative total of 320 percent, or 6.3 percent compound, over the full period.
Chart 2. Yearly Returns from January 2, 1999 to Date
On an yearly basis, the portfolios selected by The Acquirer’s Multiple® have generally outperformed, although underperformed in 1999 (-6 percent), 2008 (-10 percent), 2014 (-3.6 percent), and 2015 (-12.8 percent).
Chart 3. Rolling Yearly Returns from January 2, 1999 to Date
The average rolling twelve-month return for any stock selected by The Acquirer’s Multiple® during any week in any year was 20.1 percent, beating out the Russell 1000 TR’s average stock at 7.4 percent by 12.7 percent.
Chart 4. Drawdowns from January 2, 1999 to Date
The worst drawdown for The Acquirer’s Multiple® screen was -66 percent, which occurred between July 2007 and March 2009. Over the same period the Russell 1000 TR drew down -55 percent.
The 30-stock screen selected by The Acquirer’s Multiple® from the Large Cap 1000 universe consistently outperformed the broader Russell 1000 TR. The trade off is periodic underperformance–approximately one in four years–and deeper and more frequent drawdowns.
Disclaimer: Backtested performance does not represent actual performance and should not be interpreted as an indication of such performance. Actual performance may be materially lower than that of the backtested portfolios. Backtested performance results have certain inherent limitations. Such results do not represent the impact that material economic and market factors might have on an investor’s decision-making process if the investor was actually managing money. Backtested performance also differs from actual performance because it is achieved through the retroactive application of model portfolios (in this case, The Acquirer’s Multiple®) designed with the benefit of hindsight. As a result, the models theoretically may be changed from time to time and the effect on performance results could be either favorable or unfavorable.