The Weekend Edition is pulled from the daily Stansberry Digest.

Money might not grow on trees, but it does grow in the "cloud"...

We have talked a lot this year about how the coronavirus pandemic has accelerated previously existing trends, particularly in technology.

A number of tech companies have proven largely immune, resilient, and even stronger in the face of an invisible, globetrotting, airborne virus... It makes sense, as machines can't get infected – with COVID-19, at least.

Technologies that help people work from home, buy from home, sell from home, and interact from a safe, social distance all became "essential" almost overnight.

As I wrote back in the February 27 Stansberry Digest, before all hell broke loose...

Think about it: Amazon (AMZN), as well as other online retailers and related web-based platforms, do an insane amount of business... in part because of the convenience they provide.

In a world where parts of the U.S. would be under quarantine with folks working from home for a long period of time, those businesses become a necessity.

Zoom Video Communications (ZM) has become the poster-child for this story...

The subscription- and cloud-based video-conferencing company grew from 10 million users in December to a peak of 300 million daily meeting participants in April. And the instant growth happened with surprisingly few hiccups (aside from "Zoom-bombing" becoming a verb).

Zoom's valuation – about 74 times sales, bigger than do-it-all juggernaut Amazon's (AMZN) has ever been – is extreme.

And although its long-term prospects can be debated (Zoom seems to be reliant on just one product right now, doesn't have ads, and larger players like Facebook (FB) have already knocked off its easy-to-use and scalable technology), there is no doubting the power of the underlying technology behind its platform.

It's all in the cloud...

The cloud probably isn't a new concept to you...

It's essentially a virtual data-storage and transfer universe that connects customers, businesses, computers, and other devices anywhere with an Internet connection.

Demand for this type of business was growing even before the pandemic struck. And now, it has never been higher.

It might not be an intuitive label... But you can think of Amazon, Microsoft, and Alphabet/Google (GOOGL) in particular as owning the cloud "hardware" market right now.

I'm talking about Microsoft's Azure technology, Amazon's Amazon Web Services ("AWS"), or Google's cloud division – services that other companies, governments, and schools use for their own cloud-based businesses.

In the first quarter of 2020, Microsoft's cloud service grew 59% year over year. And it grew 47% in the second quarter. Amazon's AWS generates roughly 75% of the company's total operating income.

Let's be clear...

These Big Tech players have their own software, like Amazon's Audible audiobook app, Microsoft's Teams, or Google's Gmail. But the point we want to get into today is that they also provide the same services they use to thousands of other companies that rely on the cloud.

These businesses can range from your local beer and wine store to a COVID-19-era darling like Shopify (SHOP), which reached a deal with Google in 2018 to host its data. Even Apple (AAPL) has used Google's, Amazon's, and Microsoft's data-storage platforms for its popular iCloud software.

And importantly, companies that were already first-movers in the cloud in their specific sectors before the pandemic struck, like Shopify, have benefited massively from the quick shift to increased reliance on all things socially distant and virus-free.

We all know the world has too much paperwork...

Here's an example.

A while back, I visited three different places (with a mask worn when inside) just to get a few signatures... And all I needed to do was get an old brokerage account transferred from a "former minor" designation to the possession of the adult.

The process is outdated and unnecessarily time-consuming. Plus, in today's world, it's potentially a health risk.

The same can't be said for forward-thinking, front-edge companies like e-signature software pioneer DocuSign (DOCU), which cuts out a lot of the red tape. (If only my local bank and the brokerage I was dealing with were smart enough to use it...)

Today, DocuSign is a household name in the documents world, which touches pretty much every industry. Its documents are admissible in court, accepted in 180 countries, and available in 43 languages.

And the company's cloud-based software is easy to use...

It allows people and businesses to save time, energy, and stress... and securely sign all their legal documents from anywhere with an Internet connection, like home... while their children are crawling around the floor during a stay-at-home pandemic.

This, of course, is a valuable thing.

So is the Software as a Service ("SaaS") business model that DocuSign and a host of other big-time software providers use. It's a ridiculously profitable subscription model.

DocuSign reported blowout second-quarter numbers this week...

The company's sales grew 45% from the same quarter a year ago – well ahead of Wall Street's expectations. Billings – the amount the company invoiced customers, which will be recognized as revenue over time – grew 61%.

And DocuSign did something that few companies have been doing of late... It increased its full-year sales guidance.

This makes sense. The SaaS model brings in more money when it has more users. Because the costs are largely fixed, profits tend to be spread out across months or years... and revenues tend to be extremely "sticky," with renewal rates of more than 90%.

In other words, once it works, you forget about it and keep paying. Good luck to the competition that is years behind.

DocuSign is a pioneer in the SaaS market...

And it's a prime example of why buying high-quality, capital-efficient companies – the ethos of our research focus – is a smart long-term strategy, in good times and bad.

Free cash flow monsters – whichever sector they are in, and especially if they have market-leading "moats" like DocuSign – are best-positioned to take advantage of whatever comes their way... pandemic opportunities and Federal Reserve-induced rock-bottom interest rates included.

And as our colleague Mike DiBiase wrote in a November 2019 issue of Stansberry's Investment Advisory, software companies are some of the most capital-efficient businesses in the world today...

Software is nothing more than computer code. The "cost" of producing another copy of a software program is next to nothing. It's virtually the same cost to produce 1 million copies as the cost to produce one copy.

You can see this in their gross margins – the profit after subtracting all direct costs of generating sales. The average gross margins of all software companies in the S&P 500 last year was 81%. That's almost double the 44% average for all other industries.

This is important. Producing high gross margins means more is left over to go to the bottom line. It translates into high profits. And because software companies' capital needs are low, most generate lots of cash.

No matter what's done with the cash, it benefits shareholders. In virtually any period you look at, software companies produce market-beating returns.

Some "little" cloud companies have been the biggest winners...

Stansberry Venture Value editor Bryan Beach has recommended several "smaller" SaaS stocks over the years, focusing on younger companies that might carry more risk, but also potentially bigger rewards.

One of Bryan's software picks is up an incredible 314% since last October, and he has identified a handful of other SaaS companies with great potential, too.

As noted venture capitalist Marc Andreessen said more than a decade ago, "Software is eating the world." It still is, and the Las Vegas-style buffet is fully stocked.

Click here right now to learn more about Bryan's Venture Value service today.

All the best,

Corey McLaughlin

Editor's note: Cloud-based software is crucial to our lives. It's no wonder these lucrative stocks have outperformed gold, small caps, biotech, and even the "FAANG" stocks over the past 16 years. Now, a critical update to this strategy could propel Bryan Beach's Venture Value annual returns to 50%... this year and beyond. To learn more about the opportunity in the growing SaaS market right now, click here.