My Stocks Are Up 10,000%!

Tired of listening to neighbors brag about stratospheric returns? Convinced their figures are nothing more than hot air? Turns out some are telling the truth--and they're willing to prove it.

By Lee Clifford

Every few weeks last fall, a shifting array of Dan Zanger's friends would gather in the basement of his Los Angeles home. They weren't there for chitchat, however, or to watch the game. They were there to witness a performance--and to learn.

For a few hours at a time, anywhere from three to five buddies would sit rapt in the darkened room, with windows shuttered to keep out the light, trying to glean the secrets of an artist at work. His blond hair as rumpled as his casual clothes, Zanger sat in front of five computer screens like a rock keyboardist surrounded by synthesizers. His body would tense as his eyes darted over the scrolling list of 800 stocks that he follows. Every so often, with the flick of a finger, he'd enter a buy or sell order.

Zanger would concentrate so hard that he didn't notice when spectators came and went. He wouldn't hear the questions they called to him. "I'm like a surgeon going in to do an operation," says Zanger. "I'm totally focused."

It's no wonder his friends and neighbors were curious. Just three years ago, Zanger, 47, was paying his bills by working in Beverly Hills as a swimming pool contractor, building Hefner-worthy tropical fantasy pools for rich and famous clients. In a good year he could make $50,000. Since then his investing, Zanger says, has turned $11,000 in savings into $18 million. That's a gain of 164,000%. "As far as I know," he exults, "it's the world record."

Talk about any recent investing trend, and Zanger will tell you he was one step ahead of the market. "I foretold the biotech move two or three months ahead of time," he says. And those other investors who got whipsawed by the rapid turnaround in Internet stocks? Not Zanger. He says he was short-selling those stocks. Referring to a prediction he made in an investing newsletter that he began publishing last year, Zanger adds, "I showed everybody the market top of March 10."

Yeah, yeah, yeah. We've all met a Dan Zanger--or 20. You know whom we're talking about: the guy at work who won't shut up about how he's whipping every fund manager on the planet with his tech portfolio. The golf buddy who can't stop droning on about the excruciatingly obscure--but incredibly lucrative--options scenarios he picked up from a $25 book. Or your neighbor's 21-year-old kid who, to hear his parents tell it, has made enough in the market to pay for their retirement.

The only difference? Zanger appears to be telling the truth. His 1999 tax return and trading records, which he shared with FORTUNE, show capital gains of $14,232,878.

Zanger is rare, but he's not alone. We undertook to locate members of a very unusual breed: individual investors who chalked up out-of-the-ballpark returns--and were willing to prove it with tax or trading records. Though no one was able to equal Zanger's universe-beating numbers, we did find a tiny, scattered tribe of investors with the kind of results that entitle them to all the cocktail-party bragging they want to indulge in. Our not-so-motley selection includes everyone from a stay-at-home dad to a personal trainer. Their investing styles couldn't be more different, though they usually combine an Olympian tolerance for risk with a penchant for unorthodox strategies that involve charts, options, margin, and the like--not to mention insane luck. They all have one thing in common: They are hands-down, no two ways about it, making mincemeat out of all those highly paid pros.

By definition, most of us can't beat the market averages. But since investing became America's most popular participatory sport in the '90s, outperforming Wall Street wisemen has become a national obsession. It's the quintessential American myth--Anybody can make it big--reincarnated for the new millennium. And like any compelling myth, it requires a handful of unlikely individuals to keep us convinced that, yes, a muscle-bound personal trainer can outinvest a hedge-fund manager with billions of dollars in his portfolio. It's a tale Horatio Alger might have penned--if he had known a world with discount brokers and online investing.

So what's Zanger's secret? The former pool contractor, who resembles a poor man's--er, a rich man's--Richard Branson, was always more than happy to explain his secrets to his friends once the market closed. He would become animated, describing to his awed flock why he bought, say, 1,000 shares of AskJeeves.com at the precise moment he did. The stock, he'd tell them, was clearly headed into a "pennant" formation--it had risen and then tapered off quickly--and thus seemed primed for another quick, steep increase.

His friends would look on in glassy-eyed bewilderment as he explained his "technical" investing philosophy. It's not exactly a strategy that would make Warren Buffett proud. Zanger completely ignores yardsticks such as price-earnings ratios and revenue growth. The only thing he cares about is how a stock is behaving. "I trade whatever the market is going to push up the most," Zanger says. "It doesn't matter what the company does, or what their earnings are." Devotees of technical analysis believe that stock prices move in easily recognizable visual patterns that an experienced investor can capitalize on. So when CMGI is gearing up to a "cup and handle," or Amazon is perilously close to a "descending triangle," or--egad--"channel formation," Zanger moves. He internalizes those curves, those spikes, like a doctor scrutinizing a heart patient's monitor in an intensive-care unit. "Stocks are my buddies," Zanger says. "I know when they feel good or when they feel bad."

At the beginning of November last year, Zanger noticed that Qualcomm's stock was acting "a little frisky." So he dove in, buying 5,000 shares on the way up from a split-adjusted $57.50 to $62.50. In a matter of weeks the stock was trading as high as $93 but was incredibly volatile. Zanger hung on, buying and selling parts of his position on dips and spikes. By Dec. 30 the price had leaped past $161. On the first day of the New Year the stock jumped a bit more, and Zanger unloaded his remaining positions at $196 and $194 for a profit of $2.7 million. How did he know to sell near the very peak? "It was clearly in a massive parabolic blowoff top," says Zanger. Obviously.

This spring, Zanger says, he moved most of his assets into cash, shielding him from the tech meltdown. There the money will remain until his charts tell him the worst is over. While he waits for that to happen, Zanger is busy preparing to raze the home he recently bought in Kirkland, Wash. He plans to replace it with a dwelling modeled on Frank Lloyd Wright's Falling Water. "You should see the pool it's going to have," he swoons. As for the building of his mini-empire, Zanger is unequivocal: "It's the greatest story ever told."

For more information about Dan Zanger visit his website ChartPattern.com