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Tesla, IBM Lead Small Rebound in Stocks

Tesla, IBM Lead Small Rebound in Stocks

China's coronavirus outbreak, which weighed on Tuesday's trading, hasn't gotten any better, but investors on Wednesday focused instead on corporate earnings and a variety of single-stock drivers. Tesla (TSLA, +4.1%) extended its year-to-date run to 36% and surpassed $100 billion in market value, after Wedbush analyst Daniel Ives expressed optimism over its upcoming Q4 earnings and the company's opportunity in China. Netflix (NFLX, -3.6%) dropped after its new-subscriber tally for the current quarter came in under expectations with a nod to difficulty caused by "competitive launches" -- presumably Disney's (DIS) and Apple's (AAPL) new services. And Dow component International Business Machines (IBM, +3.4%) headed higher after snapping a five-quarter streak of revenue declines. However, the industrial average closed with a slight loss, dipping 10 points to 29,186.

One trend starting to emerge in the Q4 earnings season: shrinking margins. FactSet is reporting that S&P 500 companies are on pace to report their fourth consecutive quarter of shrinking net profit margins for the first time since Q4 2008 to Q3 2009. Some firms, however, are capably squeezing plenty of profits from their sales; the trick is finding them. As we pointed out yesterday, large dividend hikes, like these 30 companies announced in the past year, often are a sign of growth and improving profitability. You might also look to firms that are spending vast sums of cash on repurchasing their own shares. But one particular area of the market stands out lately for its ability to turn on the profit spigot: technology. A shift toward software and services, especially those that can be turned into a subscription model, is driving increased and more stable earnings across the sector. Here, we look at 11 picks that exemplify this growing trend:

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