Dan Chan Magic
Dan Chan is a magician, not a fortune teller. But anyone who observed his investing record could be tricked into thinking otherwise.
In a little over seven years, Chan has grown his nest egg from roughly $276,000 to $1,042,000, or by over 276%, which Business Insider confirmed by viewing Chan's Merrill Lynch portfolio.
That's the equivalent of pulling a rabbit out of a hat, as the same investment in an S&P 500 index fund starting in April 2016 would have risen 207.8% to yield about $850,365 through July.
A magician rarely reveals his tricks, but in a recent interview, Chan told BI about his simple but unconventional investing strategy. But mimicking his success isn't like learning a card trick.
"Magic is easy — investing is hard," Chan said.
After missing out on a once-in-a-lifetime opportunity, Chan took a harder route to striking it rich.
Born and raised in the Bay Area, Chan became an early employee at PayPal during the dot-com boom, though he sold his shares in what's now a $73 billion company too early.
Around the same time he joined PayPal, he started performing magic shows. His interest in the craft stems from watching legends like David Copperfield and David Blaine, and by "getting fooled badly" himself, he said. Chan picked up tricks through lectures at a magic shop.
Fast-forward a few decades to March 2020, when stay-at-home orders threatened to sideline Chan's business. But what could have been a show-stopper for the so-called "mentalist," whose shows are centered on what appears to be mind-reading, turned into a big breakthrough.
Like the rest of the world, Chan got familiar with Zoom and discovered that the video-calling service could take his business to new levels. Soon, he was doing as many as 12 half-hour-long shows per day, earning up to $4,000 per show by performing for companies and billionaires.
Virtual shows saved Chan from countless hours of traveling, even though it kept him from trading stories in person with celebrities like Elon Musk, George Lucas, Paula Abdul, and Draymond Green, who are just some of the icons he's met throughout his career.
"I was doing virtual shows, but at the same time, I had so much free time," Chan recalled.
To stay busy during the pandemic, Chan started reading more about investing and, like millions of others, made a habit of picking stocks himself. Family members tried to talk him out of it as the market seesawed. He's glad he didn't listen.
There's no smoke and mirrors behind Chan's returns. The magician taught himself how to pick stocks and believes others can also create wealth for themselves and their families.
"Your portfolio manager wants to charge you," Chan said. "Why give them the money?"
Investing doesn't require a finance background or a crystal ball. Even after managing money for years and beating the market, Chan doesn't pretend to be an expert. Those following in his footsteps shouldn't be afraid to take risks, especially on companies they know and believe in.
"Investing on your gut in the beginning and making small mistakes is crucial," Chan said. "Don't wait to start investing."
He later added: "You're going to strike out, but you're going to still need to swing," Chan said. "Swing for the fences, because I used to just shoot for first base."
Like most fund managers, Chan glances at valuation metrics like price-to-earnings (P/E) ratios and looks at a company's debt load. But most of his investing strategy is heavily reliant on anecdotes and real-world experience. For example, if he sees out-the-door lines at Costco or has a bad experience with Tesla's customer service, he may buy or sell their respective stocks.
Another fascinating twist is that Chan buys at least one share of every company that hires him for a magic show, sometimes just to see how it performs. And when he has in-person shows, he looks for clues that give him insight into what's happening at the company behind closed doors.
"There was only one instance where I felt like no one wanted to be there," Chan said, naming the company off-the-record. "It felt like the corporate culture was broken."
By contrast, Chan became a believer in Nvidia after seeing CEO Jensen Huang up close. He now has a hunch about how the chipmaker's valuation has defied gravity.
"Jensen did a meet-and-greet with interns, and all the interns were lined up," Chan said. "I was thinking, 'Boy, if they did this recruiting, and people started finding out about this, people are going to want to work for Nvidia more.' Because Facebook doesn't do that — I've never heard of Mark Zuckerberg showing up to an intern event. But the interns are the future of your company, and if you get them excited, they're going to work harder for you."
Pull back the curtain on Chan's investments, and one company dwarfs the others: Alphabet. Over 70% of Chan's portfolio is in the Google-parent's Class A (GOOGL) and Class C shares (GOOG), and his profit across those two positions is almost $160,000.
"One thing I realized about Google was, whether you click on an ad or a kid clicks on an ad or you just watch something on YouTube, they make money," Chan said. "I was like, 'That's a really good business model.'"
When Chan's favorite growth stocks go on sale, the magician usually buys the dip, though doing so for Alphabet has backfired lately, which is why he's starting to diversify away from it.
It wouldn't take a mind reader to figure out what professional money managers would say about Chan's strategy. They'd certainly scoff at his all-in approach and casual use of valuation metrics.
But most fund managers trail the market, and Chan has beaten it soundly. Maybe the magician could teach those professional investors a trick or two.
