Top Rebound Stocks for Oct’26

September has been a tough month for stocks for two key reasons. First is the worsening macroeconomic picture. 10Y bond yields are rising across the developed world, driven by rising oil prices. Neither can be resolved without an end to the hostilities in the Middle East. It is anyone’s guess when that will happen.

Secondly, the launch of Meta’s Muse brought to market the first viral use case of consumer AI. The implications for consumer business and platforms are significant. The rise of consumer agents threatens the moats of all businesses that depended on users becoming comfortable with a particular application on their phones or online. ‘Consumer Inertia’ was something businesses strove to develop. It may not be useful in the coming years. Apps like Booking, Airbnb, and businesses like Planet Fitness fell on the news of Muse’s launch.

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The market is impatient and is selling off any stock exposed to AI disruption. As with almost all rebound stocks, once the price falls, negative narratives take on a life of their own. The key is to separate the broken franchises from those facing temporary air pockets.

Below, we present 5 such potential rebounds. For each name, we provide our high-level thesis, the reason the stock is down, and the KPIs we use to assess the business.

An often underrated strategy is buying individual companies during periods of distress. Buying the dip in the index is almost a reflex for most investors. Buying the underlying company that is actually in trouble is not. Done carefully, the second approach pays a lot better.

Case in point: the COVID crash. The S&P 500 dropped ~34% in 5 weeks. United Airlines lost 76% of its value. The stock is barely 25% above its pre-pandemic price today, yet if you had bought after the crash, you would have earned 2x the index's return. This is a frequently repeated trend.

But the key is that most cheap stocks deserve to be so. That is why we do the research. Our calls are tracked publicly. We are happy to report the Rebound Capital Portfolio has outperformed the S&P 500 by ~2.2% since inception on 25th August 2025 through 7th October 2026.

The best opportunities exist in uncertain times.

The only way to invest in uncertain times is with conviction. And conviction comes from deep research.

Intuitive Surgical is the leader in robotic-assisted surgeries, with ~90% market share. An interesting aspect of the company is that it generates most of its revenue from instruments and accessories rather than its surgical robots. So the more surgeries done using da Vinci machines, the more ISRG makes (~$1,900 per procedure). In FY25, revenue was $10.1B (+21% YoY), with ~85% recurring, and ~3.15 million procedures were performed on da Vinci systems. The company has zero debt.

The stock peaked at >$600 in Jan’25 and now trades at ~$414, a ~32% drawdown. We own a small position.

The drawdown is driven by multiple compression and slowing growth in US surgeries. The key reasons are:

We think this is a very long-term compounder, and the headwinds from slowing bariatric surgery are short-term. Use cases will keep rising. Bariatric surgery now accounts for only ~2% of global procedures, so most of the GLP-1 hit has already passed.

We do not see competition denting Intuitive this decade. Medtronic’s Hugo has performed tens of thousands of procedures in its lifetime, and the da Vinci performs that many in ~4 days. If a da Vinci surgery goes wrong, it’s a known complication. But if you use a new product to save 15% in costs and then something goes wrong, it may be difficult to diagnose the issue.

The numbers show no loss of share either. US system placements grew by 24% in Q2’26, and system prices rose. New use cases also keep coming. Only ~15% of the ~22 million soft-tissue operations that could be performed each year robotically are performed that way today.

The only qualm we have is the valuation at ~36x forward earnings and the slowing US growth rate. We hold this as a long-term position and will wait for the US growth rate to stabilize and rise.

Rollins is the largest pest control company in the US. It owns regional brands such as Orkin, Fox, and HomeTeam. Pest control is often a recurring business, as treatments need to be repeated. For Rollins, more than 80% of revenue is recurring. In FY25, revenue was $3.76B, up 11% YoY (+6.9% organic). Free cash flow was $650M. A key feature of Rollins’ business model is buying out smaller pest control companies and integrating them into the larger Rollins umbrella.

The stock peaked at ~$65 in Feb’26. It is now down ~53%.

The key reasons for the drawdown are:

Rollins is a high-quality business facing a revenue slowdown. The major cause of the drawdown is the high starting valuation and slowing growth.

The growth challenges in the residential segment (~45% of FY25 revenue) are a huge headwind. The other 2 segments are doing fine. Commercial (33% of FY25 revenue) grew 7.2% in Q2’26, and termite and ancillary (21% of FY25 revenue) grew 8.9%.

In the residential business, Fox (door-to-door sales) and HomeTeam (which sells through home builders) continue to grow because they don’t rely on online search. The management has cited AI search as a major cause of the slowdown in new customer acquisition.

We estimate that the shift in customer behavior is permanent. Rollins will have to resolve this issue. While growth is a challenge, Rollins’ moat is intact. Their competitive advantage lies in sticky customer relationships and network density.

At ~$31, the stock trades at ~25x FY26 earnings vs ~55x at the peak. That is not cheap for a business growing organically at ~6%. For now, we will wait and watch.