The Acquirer’s Multiple® Canada All TSX Stock Screen Backtest

Tobias CarlisleStudy Comments

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Chart 1. Returns from January 2, 1999 to June 16, 2017 (Log.)

We backtested the returns to a theoretical portfolio of stocks selected by The Acquirer’s Multiple® from the Canada All TSX stock screen. The backtest assumed the screen bought and held for a year 30 stocks selected from the All TSX universe (the largest 95 percent of all TSX stocks by market capitalization). The portfolios were rebalanced on the first day of the year using the most recent fundamental data. The backtest ran from January 2, 1999 to June 16, 2017.

Over the full eighteen-and-one-half year period, the screen generated a total return of 2,536 percent, or a compound growth rate (CAGR) of 19.1 percent per year. This compared favorably with the S&P/TSX Composite TR, which returned a cumulative total of 232 percent, or 4.7 percent compound.

Chart 2. Yearly Returns from January 2, 1999 to June 16, 2017

On an yearly basis, the model portfolios selected by The Acquirer’s Multiple® outperformed 13 1/2 of 18 1/2 years, although underperformed in 1999 (-6 percent), 2000 (-17.1%), 2008 (-4.8 percent), 2014 (-10.2 percent), and 2015 (-13.3 percent).

Chart 3. Rolling Yearly Returns from January 2, 1999 to June 16, 2017

The average twelve-month return for any stock selected by The Acquirer’s Multiple® Canada All TSX screen was 22.2 percent, beating out the S&P / TSX Composite TR’s average stock at 6.6 percent by 16.1 percent.

Chart 4. Drawdowns from January 2, 1999 to June 16, 2017

The worst drawdown for The Acquirer’s Multiple® Canada All TSX Stock screen was -63 percent, which occurred between July 2007 and March 2009. Over the same period, the S&P / TSX Composite TR drew down -50 percent.

The 30-stock portfolios selected by The Acquirer’s Multiple® from the Canada All TSX universe consistently outperformed the broader S&P / TSX Composite TR. The trade off is periodic underperformance–approximately one in four years–and a deeper drawdown in 2007 to 2009.

Click here to see the top 30 names in The Acquirer’s Multiple® Canada All TSX Stock Screener (must have a registered and paid subscription to The Acquirer’s Multiple®).

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.

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