My Stock Buyback Bot Was Crushing It... Thanks to 220 Phantom Signals from Stock Consolidations

Hey there, it's your friendly neighborhood Old Man Dev. (That's my online persona, not my actual age – mostly.)

I spend my weekday evenings and weekends building AI agents and automated trading bots. Today, I want to share a massive backtesting pitfall I recently stumbled into. The TL;DR? A strategy that looked incredibly profitable turned out to be a mirage, all thanks to unadjusted data.

The Glitch in My "Cannibal Strategy" Backtest

I'd been developing a strategy to invest in companies that consistently reduce their outstanding shares – what I call "Cannibal" stocks. When a company buys back its own shares from the market, it tends to increase the value per share. It’s a pretty straightforward concept.

I ran a backtest using 10 years of historical data, and to my surprise, it showed exceptionally good performance. Honestly, I was pretty excited, thinking, "Hey, this might actually be a winner!"