SledgeKey Backtests
Does midcap value still work? We backtested it two ways.
Most free backtesters test a strategy against the list of companies that exists today. Any company that went bankrupt, was seized by regulators, or otherwise left the exchange along the way has already been removed from the data, which means the strategy under test never has to own its casualties. This is survivorship bias, and although nearly every backtesting guide warns about it in the abstract, it is almost never measured, so we measured it.
We ran the same midcap value screen over the same nine and a half years twice. The first run used a survivor-only universe, the way most free tools quietly do. The second run was honest: every company listed at each rebalance date was eligible for selection, including the ones that later disappeared, and any holding that delisted was booked out at its frozen last traded price.
Growth of $100,000 · 2017–2026
The same screen ran over the same dates, and the only difference between the blue and gold lines is whether delisted companies were allowed to exist.
View the data as a table (calendar year-end values)
| Year | Honest | Survivor-only | SPY |
|---|---|---|---|
| 2017 | $121,678 | $126,164 | $119,085 |
| 2018 | $119,833 | $120,890 | $126,396 |
| 2019 | $135,486 | $132,981 | $146,987 |
| 2020 | $154,863 | $145,476 | $174,481 |
| 2021 | $187,023 | $195,438 | $217,771 |
| 2022 | $162,495 | $176,374 | $199,907 |
| 2023 | $203,577 | $226,900 | $228,834 |
| 2024 | $282,426 | $317,428 | $304,392 |
| 2025 | $324,319 | $363,385 | $347,832 |
| 2026 | $345,907 | $387,573 | $389,137 |
The exact screen
The full configuration is listed below exactly as it ran, so that anyone who wants to reproduce the result, or pick it apart, can work from the same table we did.
| P/E ratio | 0 – 15 (trailing twelve months, positive earnings required) |
| Market cap | $2B – $20B |
| Selection | Top 20 qualifying companies by market cap at each rebalance |
| Weighting | Equal weight, max position size 10% |
| Rebalance | Quarterly (39 rebalances over the window) |
| Transaction cost | 0.10% per trade (honest run paid $6,229 in modeled costs) |
| Initial capital | $100,000 |
| Benchmark | SPY (total price return over the same window) |
| Universe | NYSE + NASDAQ operating companies (no SPACs, REITs, ETFs, or funds). Point-in-time: eligibility at each rebalance reflects the companies listed on that date. |
| Delisting treatment | Honest run: delisted holdings are booked out at their frozen last traded price. Survivor-only run: companies that later delisted are excluded from the universe entirely. |
The result, run both ways
| Metric | Honest | Survivor-only | SPY |
|---|---|---|---|
| Total return | 245.91% | 287.57% | 289.14% |
| Annual return (CAGR) | 13.90% | 15.27% | 15.31% |
| Final value | $345,907 | $387,573 | $389,138 |
| Sharpe ratio | 0.59 | 0.64 | 0.80 |
| Volatility (ann.) | 21.73% | 21.92% | 16.25% |
| Max drawdown | -34.56% | -36.32% | -23.93% |
| Calmar ratio | 0.40 | 0.42 | – |
| Winning months | 72 of 115 | 68 of 115 | – |
| Total trades | 868 | 793 | – |
| Avg holding period | 201 days | 236 days | – |
| Annual turnover | 89.7% | 78.0% | – |
The gap is the finding. The survivor-only run reports 15.27% a year, which is effectively the index, while the honest run made 13.90% a year and fell behind it. Nothing about the screen changed between the two runs except whether the data was allowed to remember companies that later disappeared, so a backtester that deletes the casualties would have told you this strategy kept pace with SPY when in reality it lost ground for nine years.
The 30 companies survivorship bias would have deleted
These are the delisted companies the honest run actually held at some point, positions a survivor-only universe never gets the chance to pick. A fair number of them were acquired at healthy premiums rather than going to zero, and that mix is worth absorbing, because once delisted companies are removed from a universe the screen selects a different twenty names at every rebalance and the entire history shifts along with them.
The most consequential name on the list is Silicon Valley Bank. The screen was holding SIVB in March 2023, when regulators seized it, because right up to that week it looked like everything a midcap value screen wants: a cheap, profitable, mid-sized bank. Credit Suisse was in the book for its final descent into the UBS rescue as well. A survivor-only backtest cannot surface either event, since in its universe neither company ever existed.
What this backtest does not prove
A page like this earns whatever credibility it has in this section, so here is everything the result above does not establish.
The strategy lost to the index. Even the flattering survivor-only version only matched SPY, and the honest version trailed it by 1.4 points a year while carrying more volatility and a deeper drawdown, so anyone hunting for a market-beating formula should keep hunting. What this page demonstrates is a measurement problem: the same mediocre strategy reads as index-matching or index-trailing depending on whether the data remembers the dead.
One window, one configuration. This is a single 9.5-year run that happens to span an era brutal to value and kind to megacap growth, the exact stretch where SPY was hardest to beat. Different dates, bands, or rebalance schedules will produce different numbers, and the size of the survivorship gap itself varies by segment: in our small-cap run ($300M–$2B) the gap was +0.89pp/yr, and in a large-cap run it shrank to +0.31pp/yr. Midcap value is where it bit hardest, which is itself a finding: the more your strategy fishes where companies die or disappear, the more a survivor-only backtester flatters you.
Frozen-price booking is conservative but imperfect. When a company delists, the honest run books the position out at its frozen last traded price. For acquisitions that approximates the deal price; for collapses like SIVB it may still be generous; the true exit for a retail holder could be worse. And a handful of the delistings above are foreign issuers ending their US listings (ADR terminations), where the delisting is administrative rather than a verdict on the business.
Modeled costs flatter real execution. The 0.10% per trade covers commissions and typical slippage at midcap liquidity. Real execution during stressed markets runs worse than any flat assumption, and selling a collapsing bank in March 2023 is about the most stressed trade there is.
You can run this exact screen, or your own version of it, on the same survivorship-free point-in-time data and see how your strategy holds up with the casualties left in.
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