2023 was an unexpectedly strong year for the stock market. The emergence of generative AI created what might have otherwise been a disastrous year. Its emergence also created a situation in which a select few mega cap stocks accounted for an outsized portion of returns. The result was that sectors including communications and Information Technology were extraordinarily strong.

On the flip side, sectors including utilities, energy, and defensive stocks performed poorly in 2023. That’s where we’ll be looking at today in an attempt to identify contrarian stocks with strong rebound potential. Without further ado, let’s look into those companies and their stocks.

NextEra Energy (NEE)

NextEra Energy (NYSE:NEE) is beginning 2024 by showing flashes of breakout potential that promise to lift its stock price higher. On the second and the 4th, share prices jumped upward— which is a strong sign overall.

My guess is that the market is responding to the notion that 2024 won’t be exactly like 2023 was. What I mean is simple: Utilities firms constituted the worst performing sector in 2023. 

Investors can point to a lot of factors for the poor performance from the sector. For example, the utilities business is capital intensive and requires heavy investment to create the infrastructure that provides power. With interest rates higher than they’ve been in decades it should be little wonder why utilities then performed so poorly.

Additionally, bond yields were historically high which made the dividends that utilities stocks pay, ordinarily lower than the 5% bonds were yielding, comparatively unattractive. Meanwhile, NextEra Energy continued to perform well while growing and operating a fundamentally strong business. I believe investors won’t continue to ignore the company in 2024. 

Public Service Enterprise Group (PEG)

Public Service Enterprise Group (NYSE:PEG) is perhaps a lesser-known utilities stock than NextEra Energy, but one to consider nonetheless. 

Let’s run some quick numbers just to give you a better idea of what the potential returns look like based on Wall Street’s target prices. Should Public Service Enterprise Group’s shares increase to their average target price, that will equate to 10.4% returns including a $0.57 quarterly dividend. At the high end list price, those returns rise above 17%. 

Again, it’s reasonable to assume that utilities stocks will move higher in 2024. Bond yields are not as attractive as they were and that makes utilities and their dividends again look attractive. The company is the largest transmission and distribution utility in the state of New Jersey and regulated operations account for more than 90% of earnings at the firm. In other words, the company has a monopoly over its geographic area, making it very stable overall and arguably a wise investment because of that stability.

Pfizer (PFE)

Investors have consistently heard that Pfizer’s (NYSE:PFE) post-pandemic outlook is bleak. That seemed to be the prevailing narrative around the company and its stock all throughout 2023. Share prices fell steadily without much relent until very recently.

The reason that investors have been so skeptical is simple: not only is the pandemic over but people are generally more reluctant to get follow-up vaccines as well. The result was that Pfizer warned in mid-December that 2024 revenue could fall.

Ironically, that was about the same time that the stock’s free-fall changed course. A lot of that inversion probably has to do with the company’s acquisition of Seagen and its cancer therapies. However, I think it’s more than that. Pfizer has a strong pipeline of drugs scheduled to come out in the next year or so all funded by its pandemic win. I think the market is finally simply allowing itself to be a bit more optimistic about a company that has been a major name in the pharma sector for a long time.

Altria (MO)

Altria (NYSE:MO) can be classified as a sin stock or a consumer staple, depending upon how you look at it. In either case, it’s a strong choice for investors who are seeking reliable income and who have no compunction about directing their capital towards nicotine and cigarettes. 

Cigarettes are primarily where Altria continues to make its money. And yes, cigarette smoking continues to decline. In fact, Altria saw cigarette shipment volume decrease by roughly 10% during the third quarter. The company owns Marlboro and overall revenues declined by more than 5% during the period.

Marlboro cigarettes account for 42.3% of cigarette market share so Altria is still in a good place even if cigarette smoking continues to decline. The company has a strong cash cow that can subsidize it through its next phase of development. That phase, of course, will be all about developing smokeless tobacco products that will hopefully lead to greater and greater revenues.

For those willing to get behind the company there’s a big fat dividend yielding 9.44% at the moment.

Visa (V)

Visa (NYSE:V) is one of the most obvious defensive stock choices available to investors in 2024. It’s no secret that Americans are spending or using their credit cards more than ever and racking up serious debt. In fact, credit card debt is now above $1 trillion which is a record.

The American consumer will not be deterred by higher interest rates or the prospect of a recession: spending is King and even if cash is low, credit is readily available and highly utilized. While I remain highly skeptical that the U.S. can indefinitely indebt itself through credit, Visa is going to win. 

Consumers continue to use credit to subsidize all kinds of spending that is itself a reflection of pent-up demand from the pandemic. Those consumers were especially keen on travel which is reflected in the rapid increase in cross border payments at Visa. That, in turn, is reflected in revenues that increased by 11% during the most recent quarter and income that increased by 14%. 

Chevron (CVX)

Chevron (NYSE:CVX) shares continue to trade at a low price that make the stock very much worthwhile as a contrarian pick. Given that the energy sector was especially weak in 2023, investors remain curious to know if 2024 is expected to be any different.

The news there is frankly mixed. Many headlines highlight the idea that prices at the pump will continue to fall throughout 2024. That’s obviously good news for consumers who continue to deal with high prices everywhere. 

While that would seem to suggest that Chevron may have a difficult 2024 there’s a reason to believe that will not be the case.

There are two primary factors to consider that have the potential to send Chevron’s price much higher. The Energy Information Administration expects that crude oil prices will rise from $78 in December to $84 by mid 2024. That’s clearly a good sign for Chevron. Beyond that, the EIA also predicts that crude oil and petroleum exports will reach a record high of 2 million barrels per day in 2024.

BP (BP)

BP (NYSE:BP) is pretty much the antithesis of Chevron as energy companies go. The company is a European energy firm and as a result is much more oriented toward green energy overall. Chevron, on the other hand, is all about taking more and more oil out of the ground.

I’d argue that it’s pretty clear that Chevron is winning relative to BP as far as business strategy goes. In fact, BP is currently in quite a bit of trouble as it canceled a joint wind project with Equinor (NYSE:EQNR) off New York.  

To be clear here, I don’t think BP is doing well at all. However, I do think that there is going to be a buying opportunity moving forward. Share prices will probably continue to fall and BP will likely be forced to implement impairment charges. Those impairment charges will serve as a reminder of the company’s overzealous push to decarbonize that has resulted in poor returns. 

Again, that doesn’t signal that BP has done well. However, BP shares are probably going to remain lower for some time and there’s going to be an opportunity to pick them up at a discounted price. Hopefully, the company will then signal that exploration and production are the most important facet of its business. If it does that, shares are bound to rise.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.