Backtesting of the icTracker v/s major world indices

The icTracker is a ground breaking Intellectual Capital tracking tool. In using Intellectual Capital to explain the difference between the market price and book value of a stock, it seeks to quantify the value of intangibles in the business that the market has already factored into its pricing calculations for the stock. However we wanted to be absolutely sure. Hence we asked the following questions of icTracker :

  • Does the intrinsic stock price that icTracker calculates, mirror the actual market price of the stock?
  • Can recommendations from the icTracker be used by a fund manager as the basis for actually investing in the stock market?
The only way to answer these questions definitively and set at rest all doubts about the effectiveness of the icTracker was to Backtest its recommendations. And this is exactly what we did.

Backtesting methodology

The icTracker calculates the intrinsic value of stocks it tracks every quarter, as soon as their financial results are declared. Hence to back-test the icTracker, we created a portfolio based on the recommendations from icTracker starting March 2005, and thereafter rebalanced this portfolio every quarter depending on the new recommendations from icTracker for the quarter. We selected the leading Bluechip and Broad market indices as our benchmarks. Our goal was to establish that an icTracker based portfolio outperforms every benchmark index over the long term. Just to make it interesting, we also benchmarked against the top performing mutual fund, where such data was available.

We started with 100,000 in local currency and conducted our trades in the middle of the quarter, in order to budget sufficient time for all results from the previous quarter to be announced. We also factored in brokerage charges of 0.1% per transaction and included the impact of corporate actions on active stocks in our folio. Here are the results.

icTracker Backtesting results
CountryIndex typePerformance of icTracker v/sStart DateEnd DateIndex CAGRicTracker CAGR
IndiaBluechipBSE SENSEX30 Jun 200830 Jun 20189.56%31.32%
Nifty 5030 Jun 200830 Jun 20189.62%
Broader MarketBSE 20030 Jun 200830 Jun 201810.16%
Nifty 50030 Jun 200830 Jun 201810.25%
MidcapNifty Midcap 5030 Jun 200830 Jun 20188.42%
United StatesBluechipDJ Industrial Avg30 Jun 200830 Jun 20188.47%16.56%
Broader MarketNYSE US 10030 Jun 200830 Jun 20185.82%
DJ Composite Avg30 Jun 200830 Jun 20187.83%
SnP 50030 Jun 200830 Jun 20188.40%

These results provide conclusive evidence that an icTracker based portfolio has outperformed every major stock market index over the long term.

If you have any questions about the icTracker backtesting, have a comment or otherwise want to provide feedback, please Contact Us.