Editor's note: The software industry has treated investors well in recent years...

That's because these companies are extremely "capital efficient" businesses. Since software is just computer code, the cost of producing another copy of a program is next to nothing.

Because of that, the sector has become extremely popular.

But as Stansberry Venture Value editor Bryan Beach details in today's Masters Series – the second part of his January 28 Digest – the most profitable corner of the software space is full of opportunity today. As Bryan explains, you just need to know where to look...

The Secret to Making Triple-Digit Gains in Software Stocks

By Bryan Beach, editor, Stansberry Venture Value

The software industry is hugely capital efficient – and the market knows it.

These businesses can be immensely profitable, as I showed you yesterday. As a result, investors have been bidding up shares of software companies...

Over the past 15 years, software companies have returned 27% per year, on average. The overall market produced an annual return of around 13% over the same span.

Most investors would be ecstatic if they made twice the returns of the overall market for a decade and a half.

But the thing is, you could have done even better with a small sector of the software industry. It's a lesson that Porter learned firsthand while building another business about five years ago. This was back when I still had a front-row seat while sharing Porter's office...

It's the story of how Porter discovered one of the world's most capital-efficient companies... and the secret to making big gains in software stocks.

As many of you know, Porter launched OneBlade in 2015 to complete his quest to make the world's finest shaving razor. I remember sitting in the old bedroom-turned-office back in 2014 and 2015, listening to Porter on calls with OneBlade CEO Tod Barrett as they started to build out the tech infrastructure to operate the company's online store...

They needed to pay for servers... a data center... an inventory-management system... and a payment-processing system. Plus, they had to hire enough folks to run everything.

The estimated costs? $250,000 and six months' worth of in-depth planning. It would be a tremendous investment for the young startup... especially after already spending about $1 million and looking through nearly 100 different prototypes to make the actual product.

But after doing some research, Porter and Tod discovered a better – and much cheaper – alternative. They found a company that would handle all the headaches for them... Even better, this company would do everything for a relatively small, recurring subscription fee.

I'm talking about e-commerce software pioneer Shopify (SHOP)...

Porter was so impressed with the company's offerings that he asked me to start reviewing the company as a potential recommendation in Stansberry's Investment Advisory.

It was immediately clear what Porter, as a business owner, found so compelling about Shopify... Instead of the huge investments Porter and Tod had been mulling before, Shopify's software offered an innovative and relatively new model that solved OneBlade's online-store problem.

OneBlade didn't need to buy any servers or software licenses. And it didn't need to hire any new employees. The best part? Shopify would have everything up and running in just six weeks.

You see, Shopify operated its business using the Software as a Service ("SaaS") model...

The secret to the SaaS model is "cloud computing" – or using the Internet to access its software. We take it for granted today, but it was still a pretty new idea in the early 2010s.

Porter didn't know much about how Shopify operated at the time... but he knew its service solved a major problem he faced. And Porter realized that if this solution worked for OneBlade, it could work for hundreds of thousands of small businesses across America, too.

As I researched the business, I immediately liked the numbers. I also believed Shopify had a cool product. And during a conversation with Tod, he assured me... "Bryan, this product isn't just 'cool.' It changes everything."

Given my background in software, it's ironic that Porter, a financial-research publisher, and Tod, a product-development guy at heart, needed to fully convince me about the power of Shopify's SaaS business model...

But all my previous experience came with the much older, traditional, "perpetual license" software model...

Under the perpetual license model, the customer buys the software and pays a large, upfront, one-time license fee. Customers must also shell out thousands of dollars more to buy servers or computers to store and run the software.

In addition to the license and hardware costs, customers must also pay for the software installation... and to train their employees to use it. These extra fees are known collectively as "professional services."

And the costs don't end there... On top of the license, hardware, and professional-services fees, customers also need to pay for "maintenance."

New software rarely works perfectly when it's first released... Maintenance fees cover the cost of troubleshooting the software – things like customer support calls and bug fixes. These fees also give customers the right to receive future software updates and upgrades.

You can see how this all adds up... As I said earlier, for OneBlade, Porter and Tod figured out that these costs added up to $250,000 up front – not including the maintenance.

Buying and installing new software under the perpetual license model is an expensive and time-consuming process. But that's the way the software industry operated for decades.

The SaaS model changed all that... SaaS customers rent the software, paying only small recurring fees as they use it.

While working as the controller of the software company, I spent most of my time properly applying revenue rules under perpetual license agreements... This task involved extensive knowledge of a rule book that rivaled the size of a phone book. At that point, "the cloud" was still in its infancy... and most software applications weren't ready for the SaaS model.

And since my employers and clients weren't dealing with the cloud, it wasn't until I started studying capital efficiency with Porter that I first thought about software as a customer.

Watching the OneBlade launch was a fascinating case study. That's when a light bulb switched on, and I began to fully appreciate the SaaS model...

Buying under the SaaS model saves precious cash for software customers... as well as the time and back-office headaches of installing and maintaining the software. Instead, these companies can focus on building their businesses and keeping their own customers happy.

The SaaS model is a much more capital-efficient model for customers...

That capital efficiency translates into fast growth and big profits. And it's why investments in pure SaaS companies vastly outperform investments in traditional software companies...

About 400 software companies trade on the public markets in North America. But only around 70 of them are pure SaaS companies that have gone public since 2004.

If you invested in nothing but these pure SaaS companies when they went public, your annual returns would have crushed the return of not only the overall market, but all other software companies.

Since their initial public offerings, SaaS companies returned an astounding 64% per year on average. That's nearly three times higher than the broader software sector... and six times higher than the overall market. No other sector produced results anywhere near that.

Even among the stellar collection of SaaS companies, Shopify is an outlier...

Right after OneBlade signed on as a Shopify customer in March 2016, thanks in part to my deep dive for Porter, we recommended buying SHOP shares in Stansberry's Investment Advisory.

We made the recommendation long before it became a darling of Wall Street and newsletter pundits in recent years. We hit our trailing stop loss after 18 months... booking an incredible 256% gain.

But in hindsight, we wish we would have held on...

Shopify has continued to soar. The stock is now up more than 3,200% since our initial recommendation! That's a compounded annualized return of more than 100%.

SaaS companies like Shopify are no longer a secret...

Legions of professional money managers have finally figured out what entrepreneurs like Savneet Singh and Porter learned simply from running their own businesses...

SaaS is the most capital-efficient sector of the already capital-efficient software space.

The secret of the massive success of the SaaS model is that it isn't just capital efficient for software vendors... It's also the most capital-efficient way for customers to access and use software.

These days, the market doesn't really have a SaaS "bargain bin"...

Most SaaS companies are growing fast and rarely look cheap. They typically trade for more than 10 times sales – compared with less than four times sales for the S&P 500. (Shopify traded at about 10 times sales when we recommended it... and now, it trades for a whopping 56 times sales.)

At this point, if you blindly buy an SaaS business, you could get burned... Hypergrowth is likely in the rearview mirror for stocks that have already run up five or 10 times.

That's why I've focused on finding SaaS opportunities that largely go uncovered... In my Stansberry Venture Value service, I'm looking for SaaS businesses that the market is currently missing for one reason or another.

Like all my Venture Value recommendations, these companies are tiny. There's almost no analyst coverage... and no chance of showing up on an institutional investor's Bloomberg terminal.

My team and I have discovered three "hidden" SaaS opportunities with up to 3,000% potential... They're the type of early-stage companies that could easily double or more in a few years – especially considering the impressive track record of this world-class business model.

If that sounds like something you would be interested in, I hope you'll take the next step...

Stansberry Research publisher Brett Aitken just put together an urgent presentation to explain why this is the most lucrative stock strategy we've seen at our company. And even better, he has arranged a special, limited-time offer for anyone who wants to access this research right now...

Today, you can get your hands on all my research in Venture Value – including a brand-new special report with all the details about the three SaaS companies I mentioned above – for more than 65% off the regular price. Get the full story right here.

Good investing,

Bryan Beach

Editor's note: In recent years, Bryan has discovered a "loophole" of sorts... It's a collection of tiny, early-stage software companies that employ the same capital-efficient business model as Shopify and other top performers in the sector.

Yet today, these companies remain effectively unknown by Wall Street and the general public. And because of that, Bryan believes these stocks present tremendous opportunities for investors... He thinks they could easily grow 10-fold over the next few years.

So if you've missed out on the big rally in SaaS stocks, consider this your second chance... We've prepared a special presentation with everything you need to know, including how to access Bryan's research at more than 65% off the usual price. Click here for all the details.