Editor's note: Two years ago, our in-house tech expert Dave Lashmet found the "next Apple."

If you aren't familiar with Dave's story, you should be... Besides being Porter's college professor – and his first researcher – he spent 10 years working in high technology, doing a combination of invention, product design, and market testing, as well as dealmaking with the world's leading technology firms.

Today, Dave writes our elite Stansberry Venture Technology research advisory, which takes a venture capital approach to investing. His team of about 10 analysts – including outside experts – goes anywhere in the world in search of what could be the next Apple.

In today's Masters Series, Dave explains how he found the next Apple at the 2016 Consumer Electronics Show...

Finding the Next Apple

By Dave Lashmet, editor, Stansberry Venture Technology

Consumer-electronics behemoth Apple (AAPL) stole all the technology headlines this week.

Besides the new smart watch – Called the Apple Watch, Series 4 – Apple debuted three new phones...

It led off with the iPhone XS, which will have a display screen sporting 2.7 million separate picture elements (or "pixels"), and will retail for $999. Its bigger brother, the iPhone XS Max – aka Max – will have 3.3 million pixels across a 6.5-inch edge-to-edge screen, for $1,099. Apple also announced a less expensive phone, the iPhone XR, which will have 1.5 million pixels, but the same chip and cameras as the current iPhone X. It will retail for $749.

Apple also announced a new processor – the A12 chip – which is the first of its kind with 7 nanometer scaling. It holds 7 billion transistors and offers performance gains of up to 50%.

Finally, Apple revealed three new cameras, which allow burst mode, depth mapping with the back cameras, and facial ID and FaceTime calling from the front camera. Its cameras will allow for higher-quality photos and videos.

Apple has invented five world-beating products in the Mac, iPod, iPhone, iPad, and the Apple Watch. Now, each year, it refreshes them.

Every tech investor should know about Apple. Odds are, you own more than one Apple device. And if you own any broad stock-market index fund or technology-focused fund, you probably own shares of Apple, too.

We're interested in finding the next Apple at Stansberry Venture Technology. And to do that, we focus on small companies with big potential.

Apple's path to a $1 trillion market cap took decades. The company's first phase ended with Steve Jobs in disgrace. That's when professional managers took over Apple – then promptly destroyed it.

It's the second coming of Steve Jobs that investors think of now when we think of Apple. His singular focus on technological quality – with an ample dose of marketing – left nearly all his competitors in the dust.

Quality means a lot of things: reliability, usability, beauty, novelty, and accessibility are bonded seamlessly together as one piece.

Notice that "inexpensive" is not on that list.

Apple doesn't make its huge margins by beating its competitors on price. Instead, it is an expert at packaging slightly better tech hardware with software that "just works." That's something global electronics firm Sony (SNE) never mastered.

The iPod wasn't the first MP3 player. It was simply the best... and the easiest to use.

Apple figured out how to fuse hardware and software that consumers wanted to buy. Apple also built "walled gardens" around your access to your music. And in time, it built walls around your photos, movies, and games, too.

Apple isn't the only big winner, of course. Google's parent company Alphabet (GOOGL), Amazon (AMZN), Facebook (FB)... and to a lesser extent, Netflix (NFLX) are all Apple's rivals.

Each company focuses on Internet content. Netflix got an early start at developing its own content. Now Amazon does, too. Google owns YouTube, so it has millions of folks to develop content for it. And of course, Facebook has a different sort of content – pictures and videos of you and your friends.

Still, Apple and Google (plus Samsung) own all the devices. This is a level of lock-in that no other tech company can muster. And that's why Apple is the only trillion-dollar firm – with Amazon closest behind.

Amazon's first victory was delivering physical goods ordered over the Internet. Its cloud network tracked buying habits. From there, Amazon opened its cloud to Netflix – and then decided to compete.

Google's first success was in web searches. This work led Google to searches on physical maps – and then to turn-by-turn directions while you drive... ending with self-driving cars, which are a software app.

Granted, it's a big, global software application, shared between millions of cars and drivers. But this is still the same connected system. Our real world is mapped in Google's servers.

Apple tries to compete with Google in its Maps app. And street by street, Apple is slowly getting there. But it turns out that no amount of code will let cars drive by themselves. A whole new way of thinking is needed.

Put simply, it's called "machine learning." And one small company made a huge research bet to solve this problem before Apple, Alphabet, Amazon, Facebook, or Netflix realized it was the key for the next two decades of tech investing.

Every year, we attend the Consumer Electronics Show ("CES"). Thousands of vendors and nearly 200,000 people visit CES each year. You'd get lost without a plan and a guide...

In 2016, graphics-card and chipmaker Nvidia (NVDA) made our short list of booths to visit, even though it had hit a rough patch a few years before. Its chips were running too hot, melting the solder inside laptops.

In the aftermath of that debacle, Wall Street was focusing on the wrong thing. But we knew the core technology was novel and useful. Nvidia had a virtual stranglehold on its market. Plus, its business was growing: It powered video games.

Video games are almost as old as computers and TV monitors. They started out as something simple and fun to do. Now, the video-game industry is a $250 billion piece of the global economy – and about half is for mobile games.

The big difference is in the visuals. The games you play on your TV or PC are 10 years ahead of the ones you play on your phone because of how much more energy can push through a machine plugged into a wall, with its own cooling fans.

Still, mobile games are fun and portable. Plus, mobile phones have motion sensors, so you can tilt or touch a phone screen in ways you can't do with a TV.

On the high end, video games are approaching cinematic quality – which means you create your own movie in real time. Granted, monsters might try to kill you in the game... But that's part of the fun.

You get to be a superhero or a critical member of an elite team of soldiers. You can fight a dragon, leap from a helicopter, or fly a fighter jet over the South China Sea.

Apple and Google both missed these two core technologies. We knew all this going into the 2016 CES show. That's why we visited Nvidia. Again, Wall Street wasn't focused on its world-changing technology and dominant market share.

What we saw changed everything.

Nvidia was using its video-game technology in reverse. Instead of creating a fake scene from stick figures, it took a real scene and turned it in to stick figures.

This was the missing component for self-driving cars. And it's the first technology that Apple and Google missed.

This tech allows a car to learn what objects are and how fast they're moving. And once a car learns the dynamics of driving, it doesn't need a map. It learns like we all did back in driver's ed. And once one self-driving car learns anything about the roadway, it can instantly share it with all other cars on the road and ones that have yet to be built.

In other words, self-driving cars have a shared memory. You can put street maps and even street views from a camera in there if you want to. But fundamentally, it's a video game in reverse.

This means the core capability of a self-driving car belongs to Nvidia. And it's not just because of its patents (although those help). It's also because the company is the best at designing high-end video-game chips.

Nvidia does have one competitor: Advanced Micro Devices (AMD). But Nvidia got a $2 billion head-start on this research project and spends more on graphics card research than AMD every single quarter. As Nvidia spends vastly more on research, it gets much more in return. Ergo, every year, Nvidia designs better chips.

"The best chips" means Nvidia chips – because you don't need power-constrained mobile phone chips in a car. The chips themselves have no moving parts. And cars have a big block engine to generate electricity.

To us, Nvidia looked like another Apple. And so far, the stock has soared about 530% since we added it to our Stansberry Venture Technology model portfolio. Plus, we sold half our stake after it doubled. Today, we carry the position for zero downside risk. It's essentially like "house money" – a free stake that we can keep.

Good investing,

Dave Lashmet

Editor's note: Every month, Dave and the Stansberry Venture Technology team look for companies just as promising as Nvidia. And their latest high-tech recommendation may turn out to be just as profitable. This small-cap firm is still in "buy" range... But it might not be for long. We don't see anything getting in its way from becoming the next Apple or Nvidia, if future engineering advances play out like we expect. Learn more about this opportunity right here.