Editor's note: If you've been with us for long, you know we employ some brilliant folks...

Stansberry Research analysts have worked as top Wall Street traders... professional money managers... serial entrepreneurs... corporate executives... published researchers... "Big Four" accountants... and in several other successful roles in the world of finance.

Many of these folks also have something else in common... They were Stansberry Research subscribers first. And because of that, they know exactly what to do to help you succeed.

The long list of subscribers-turned-employees includes Stansberry Venture Value editor Bryan Beach, who was a longtime reader before he joined Stansberry Research in 2012.

We're turning to Bryan for this weekend's Masters Series, with a pair of essays that first appeared in the January 28 Digest. In the first part today, he explains the key reason why the software industry has been such an amazing place for investors in recent years...

What I Learned From Sharing an Office With Porter

By Bryan Beach, editor, Stansberry Venture Value

You can learn a thing or two when you share an office with Porter...

Regular Digest readers know Porter founded Stansberry Research in 1999. And over the past two decades, our company has grown into one of the world's largest independent financial publishers.

I joined Stansberry Research in 2012. And before the COVID-19 pandemic threw the traditional work environment out the window, I would travel to our Baltimore headquarters from my home in suburban Atlanta about once a month. For the first five years or so, one of the highlights from these trips was my front-row seat to "The Porter Show."

Back then, Porter's office was a converted bedroom in a 19th-century mansion. When I was in town, I worked at a desk in the corner of the room.

In my five years as a reader before coming to work at Stansberry Research, I could tell that Porter was a prolific writer. Between Stansberry's Investment Advisory, all the Digests, and other publications, it seemed like his byline always popped up in my inbox.

Being in the room as he churned out essay after essay only strengthened that view... Porter can write more in three hours than I can in three days.

These days, our firm has outgrown the old Victorian mansion. Working from home aside, our headquarters are now in a modern building around the corner in the historic neighborhood of Mount Vernon.

Porter no longer needs to share his space... In the new building, he has a corner office all to himself. And now, I sit out in the "bullpen" with the other analysts during my visits.

Despite the change in scenery, I still recall many of the lessons from those early years...

I'm a certified public accountant ("CPA"). And as a CPA, I'm naturally a "numbers guy." I don't have an entrepreneurial bone in my body.

So it fascinates me how Porter approaches every investment pitch with that type of mindset... He would always ask us, "Would you want to own 100% of this business for the rest of your life?" That's how an entrepreneur thinks.

I'm convinced that Porter's appreciation of "capital efficiency" is due in large part to this thinking. If you're not familiar, capital-efficient businesses grow rapidly without needing to invest in capital expenditures – like new buildings, factories, and equipment. These types of expenditures drain valuable cash and lower returns on investment.

In 2012, we sat down to build the "Capital Efficiency Monitor" for Stansberry's Investment Advisory. Porter and I came into this process from different angles...

By looking only at the "statement of cash flows" in a company's financial statements, I could see if it was a capital-efficient business by the amount of cash it generated from its operations. I'd also pore over common metrics – like a company's return on invested capital and how well it generated shareholder returns (stock buybacks, dividends, etc.).

Porter appreciated all those financial metrics as well. But to serial entrepreneurs like him, capital efficiency isn't just a bunch of numbers on a page. It hits much closer to home...

It's cash in your personal bank account.

Porter also asks questions like, "How much cash do I need to spend to grow this business?" and, "How much will it cost me to bring in and satisfy one new customer?" The less cash it takes a business to do these things, the more capital efficient it is.

As a business, Stansberry Research is incredibly capital efficient... If we doubled our subscriber base overnight, we wouldn't have to make significant cash investments to fulfill those new obligations.

We already have our team of dozens of analysts and editors in place. There would be no factories to buy. No inventory to package and ship. We would just need to send twice as many e-mails.

With that said, I was already familiar with the power of capital efficiency from working in the software industry...

Before coming to Stansberry Research, I worked in accounting and finance at a publicly traded software company – including four years as the company's controller. Then, I started a small accounting and finance consulting practice that catered only to software clients.

And if you look at the software industry, it shows why these companies have been some of the best places for your money in recent years...

Software companies are highly capital efficient, like our publishing business. The cost to produce each software sale is extremely low.

Software is just computer code... so the cost of producing another copy of a program is next to nothing. It's roughly the same whether you produce a single copy or 1 million copies.

Accounting geeks can appreciate the power of the capital-efficient software model by looking at financial statements...

The average gross margins of all software companies in the benchmark S&P 500 Index equaled 81% last year. That's almost double the 45% average for all other industries.

That's the kind of business you want to own.

So, not surprisingly, software has become one of the most popular corners of the market...

In 2018, Savneet Singh – one of the most successful young entrepreneurs you'll ever meet – explained in an interview why he and a group of investors decided to focus solely on the software industry. As he explained on The Investor's Field Guide podcast with Patrick O'Shaughnessy...

I was running a technology business that had heavy bets on software. My friends were all software investors, and we started saying, "Well, what if you created the 'Berkshire Hathaway of Software?'"

As Singh continued in the podcast...

We were like, "Wow! If Warren Buffett was 30 years old, [software] is all he'd be investing in. It is a business that clearly has a moat... Because your average customer lasts 50 years... you can raise prices every year and no one's going anywhere. And you have the ability to reinvest for growth. That sounds like an amazing place to be."

Singh was running another business – a gold-trading platform – when he realized how important software purchases were to his company's success.

So as you can see, the software industry is indeed an amazing place to be, thanks to its capital efficiency. It's something I learned in part from sharing an office with Porter. But today, it's no longer a mystery... The entire market knows all about the sector's thick profits.

So in tomorrow's Masters Series, I'll explain how it's possible to make big gains in "hidden" software opportunities... buried in the most profitable corner of this space.

Good investing,

Bryan Beach

Editor's note: You could have done far better investing in these "hidden" software opportunities than almost anything else over the past 15 years. But that doesn't mean you've missed the boat...

The best companies in this space could still grow 10-fold or more from here. And every year, more are popping up... all relatively unnoticed by the general public.

Bryan recently discovered three tiny opportunities in this powerful sector that could soar as much as 3,000% in the long run. And our publisher Brett Aitken put together an urgent presentation to explain everything you must do today to profit. Get the full story right here.