Stock Trading Strategy, Lessons from $ 343,000 Gain: Daniel Chan
- Daniel Chan is a magician who has built some leeway as an investor, especially in tech stocks.
- In more than five years, his portfolio has returned 258%, which has earned him over $ 343,000.
- He explained what he learned, including the painful mistake of selling his PayPal stock too early.
There are countless ways to invest. With so many options and approaches, it’s easy to think that you have to be an expert before you start – and never start.
But Daniel Chan illustrates that learning as you go can be very effective. Over the past five years, he’s built a six-account portfolio that yielded a 258% return, meaning that since March 2016, he had outperformed the S&P 500 by more than 100 percentage points as of November 3 and recorded a gain of $ 343,028.30.
These numbers come from Chan’s Merrill Edge account, which he allowed Insider to log into, and the percentage return is time-weighted, meaning it’s adjusted for the effects of deposits and withdrawals. The account shows that Chan is passionate about tech stocks, but not exclusively a tech investor. Alphabet’s Class A and C shares occupy nearly half of its overall portfolio, or 46%, and Lenovo is the second largest, followed by Apple. Disney and SVP Financial Group are among its major holdings.
Chan, who is a daytime magician, started off with a simple idea that Warren Buffett also preached: Only buy what you know.
“When I buy shares of companies, I buy what I see around me,” he told Insider in an email. “With so many scams, I only invest in companies with business models that I clearly understand.”
He has a second method of gaining this experience, as he often starts out small by buying one or two shares of companies that hire him to work for their employees.
Over time, he says he started reading works by famous investors like Warren Buffett and Benjamin Graham, who was one of Buffett’s main influences. Chan began to create positions based on the dynamics of different industries, looking for companies with main edges on their competition and where he felt the market trends were going.
The best performing of its portfolio based on time weighted returns are Atlassian, Palantir, Cloudflare and Textainer. But his favorite remains the giant who has hired him forty times.
“Google is the best business model in the world, even better than Tesla,” he wrote to Insider. “Even a child can click an ad by mistake – and every time that happens, Google wins $$$. No one buys a car by mistake.” Alphabet shares have gained 246% since it bought in November 2016.
As his comfort level increased, he deepened the company’s earnings reports and mixed his ideas about the competition with an emphasis on fundamentals, in particular the price / earnings and debt / equity ratios which keep its high-growth portfolio in place.
More recently, Chan wrote, he started attending business investor meetings to get ideas from other buyers. He says he’s often “the poorest guy in the room,” but benefits from the perspective of others.
He also developed a trading strategy. Chan says he’s become more aggressive in increasing his positions after the declines, saying he likes to add stocks that have seen massive sell-offs and represent large unrealized gains in his portfolio.
He also started working on reducing his tax bill.
“Negotiate in an IRA is the best because there are no tax consequences until you withdraw money from the account, ”he wrote. “It helps you accumulate earnings faster because you avoid the
tax, which you would otherwise incur when executing shorter-term trades. “
A chaotic start
It should be noted that Chan’s own investment story begins with a painful experience. He worked at PayPal from 1999 to 2000 and acquired 13 months of stock options. He sold them in 2002 and bought a wallet he thought was safer and better diversified, only to see PayPal stocks continue to soar.
Today, his PayPal stake would be worth around $ 5 million. And one lesson he seems to have learned is not to be in a rush to cash in on a good thing.
As he grew in confidence and watched his portfolio grow, he started making more speculative long-term investments and adding “moonshots”. He says he has invested in a series of companies through the crowdfunding platform Wefunder and through the investment site StartEngine.
“I’m really excited about Graze, Miso Robotics and Irrigreen. There is a big gap and barriers to entry,” he said. New additions include home smart device developer Ryse and on-demand video game streamer GameStar.