P/E ratios are useful as a yardstick for valuations especially when you look at it from a relative valuations stand point. But as a sole metric for determining whether the stock is a good buy its useless. Yes, one could argue a stock is trading 3x normalized earnings would likely be attractive, but that’s quite unlikely as there’s more under the hood than meets the eye. But it could be a good indicator to look deeper into the company, of course I would still suggest looking at other numbers before selecting it for a deep dive (rev growth, cash flows, etc). The biggest problem I see with a lot of value investors is that they think low p/e ratios are like the epitome of investing and much better to buy companies like this, while this is true for some opportunities a lot of companies trading at very low p/e are likely value traps or companies close to bankruptcy or secular decline (not bad if there’s a good thesis to a turnaround or liquidation value is higher than debt and will leave you with a good return after liquidation or you know a cigar butt company). Value investing is much more than finding a low p/e stock it’s about finding companies that will give their shareholders amazing returns at great prices regardless whether it’s a turnaround play, liquidation play, a special situation, or growth play. For example, when I first started investing I only looked for low p/e stocks and turnarounds because it was easier to invest in those stocks because you had statistics on your side, but what a lot of low p/e stocks didn’t have was quality (I’m not saying all low p/e stocks are low quality or shitty but it’s much more likely). Now I invest in many opportunities, the only opportunities I don’t invest in are the ones out of my circle of competence, or extremely ludicrous valuations like 100x p/e stocks — however, it really depends maybe the company will grow 150% a year for 5 years [doubtful but just an example] then yes I would pay 100x p/e because think about it this way let’s say A stock earns $1 in profit with a market cap of $100 in the next 5 years earnings will grow at 150% a year for 5 years and will continue to grow at whatever rate thereafter [unlikely scenario but it is just an example] and let’s say its a monopoly that means you buy $1 earnings at $100 now lets say in 5 years it earns $97.66 (12.52.52.52.5*2.5) then your purchase will be at a 5 year forward p/e of 1.03x and if its a monopoly with a wide moat then it could trade at a p/e of 20-30x = 1953$ - 2929$ in market cap, now tell me would you put your money in a 100x trailing p/e if this were to happen? If you said no you’re lying to yourself and if you say yes then now you understand why paying up and paying higher p/e is not that bad, but before you get the pitchforks out it all depends on context, growth, and quality. But for margin of safety reasons I would always try to put a discount on high growth like that because execution risk is a big thing. But the real jewels are the high quality small cap companies that aren’t well known, those are like the holy grail of investing because often times the market hasn’t discovered those opportunities and its trading at low multiples and is growing superbly well with a long run way (think See’s Candies - Warren Buffett paid 16x earnings or 25m for the company now the company earns 300+m a year in profits so in a bear case lets say trading at 8x earnings the market cap of see’s candy would be 2.4bn if it were to go public). But a lot of times what you are seeing is 100x p/e for 20% growth rates thats a PEG of 5x and will take forever to make a good return, you’ll be suffering for at least a decade. So take it from Warren Buffett growth investing has always been a part of value investing, but value investing has not always been a part of growth investing. Also just to reference your “overvalued growth stocks are crushing your value picks”, we are in a year where everyone is making money and money breeds more money and now the shoeshine boy is telling you where to place your money without the slightest clue of what is going on, other than stonks go up brrrrrr. So even if the market doesn’t crash, a lot of these “growth at any price” plays will eventually crash or will return almost nothing for the next decade because they already bid the price sky high and the earnings will have to grow into the valuations. Keeping up 30%++ growth rate is incredibly hard and even harder the bigger your market cap. There was a reference to this in Peter Lynch’s book, I don’t exactly remember the name of the company I think it was called “Electronic Data Systems”; the company did amazing grew 30% YoY consistently, super profitable, and high cash flows but the company pre-growth was bid up to $40 and by the time a lot of the growth had been executed on the stock had started trading at $3… ouch… Another reason is also interest rates. Right now the average yield on dividend stocks is 1.5% while the risk free rate is 1%. So in that context since investing is also a comparison game when rates are this cheap to return higher than 1% valuations become more generous (think about it how do you calculate capm, wacc, etc that you use for discount rates); however, if tapering were to actually happen you would see a lot of stocks dip so essentially if you’re betting on lower p/e stocks you’re more likely safer than owning 100x p/e stocks because its a long way down and growth is done with debt and equity. If debt is super cheap then growth is cheap but if debt becomes expensive then growth is more expensive thus lower growth and thus dips in the market.