I've read several studies that find that value investing outperform indexing. So why doesn't this disappear? I think its because there is always a group of people who chase after the next best thing.
So what happens, company X has a great vision, and its price goes up, it might still not have any earnings, but maybe its revenue or 'eyeballs' or whatever is rapidly increasing, more and more true believers buy into this, and justify its high price on the basis that it will keep increasing rapidly, eventually it either slows down, or fails, at which time its growth premium is destroyed, and it drops in price.
Its similar with IPOs, studies seem to indicate that if you buy say $1000 in every IPO ever launched, and checked their prices a year later, they will have lost money.. For more or less the same reason, irrational enthusiasm.
Studies compare value (low PE) versus growth (high PE) stocks, and show that value stocks increase in value by more than growth stocks. Why, because growth stocks are priced, typically, as if their growth will continue for a long time, so when it almost inevitably falls short, they lose value.
So if growth/hyped shares underperform, any approach that doesn't buy those shares, should overperform, and that's pretty much how value shares work.
I sometimes think its a bit odd.. people get very righteous about avoiding funds that have say a 1% management ratio, and say indexing is sooooo much better. Well, studies typically show about a 1% improvement of value investing over straight indexing, so surely thats also, just sooooo much better.
I think with stocks, as long as you buy a diverse group of non-bubble stocks, and don't ever sell because of panic or despair, you'll do relatively well, and will be in the top percentiles of successful stock investors.
So, its very easy to just go with indexing, if that's what you what to do, I'm sure you'll be fine. But I think its very arrogant or close minded to think its impossible to do better. You might think its not worth your while to look into value stocks, but that does not mean you can be 100% sure that its not a worthwhile approach.
I'm not convinced its 100% successful, but from both the theory I've read, and my ability to beat straight indexing by using a value-based approach, I think its very worthwhile to consider.