Hysteresis - not every stock that drops aggressively, is a value opportunity

Hysteresis in simple terms: A shock leads to a permanent effect, where the system doesn't revert to its previous equilibrium - that's why, if a stock occurs and a stock drops, you'd be naive to think it will just revert back to its mean, by default. Now, in some instances, we could see mean-reversion, when would that be? Usually when you're looking at a company with a moat or which operates in a sector with natural, sustainable monopolies (consumer staples being one). That's why, just looking at past ROE, P/E, FCF figures, and stocks that are "trading at cheap prices" isn't an adequate way of engaging in value investing. In fact, I'd argue you're speculating, or at the very least conceding that you're engaging in a thesis trade. What do I consider methodologically sound for value investing? \- **Price decay due to either** 1) Demand for immediacy from a large holder or the broader market, 2) Structural or systematic flows in the market driven by cyclicality and risk regimes. \- **Fundamental:** Cash flows showing sustainable growth on a real basis without structural reasons for mid-to-long run decay. What I don't consider methods of value. \- A structural decline in price. \- A thesis trade. Lastly, I have to echo this. The market today prices more than it values, and so, discovering value has stretched beyond forecasting cash flows and toward price-based bargaining.