I believe most absolute return hedge funds are beating the US equity markets, as long as you stayed away from EM and a couple of other things, but they're not beating their indices enough that 20% of the margin accounts for a whole lot as of right now:
http://www.hedgefundintelligence.com/Database-Absolute-Return-Indices-Performance.html
As far as earnings not supporting valuations for ALL stocks (and that's an important distinction), I put into my quantitative analysis software (Java, which I wrote myself) the following:
PE under 50
Forward PE under 50
PEG under 3
EPS growth this year over 20%
EPS growth next year over 20%
EPS growth 5 year average/year over 30%
In other words, these are stocks that are expensive but worth the money, at least in the short run. The software returned these as the top 5 picks:
ACHC
AIN
AL
ALGN
ASGN
The average PE for these stocks is about 30, and the average return is +3.74%, beating the market. And then there's this one, with a PE of 130, a 1 year return of +148%, and a YTD return of 53%:
PAYC
As I've said before, ride that tiger until he turns around an bites you.
Just as with Ben Graham-type value stocks, there is a time for momentum stocks, and those times are the absolute opposite ends of the cycle. That's a lesson I learned in the last 12 months before the 2000 top, when my "Mary Meeker stocks" like CMGI and @home were up well over 100%, but I had already pulled most of my money out of the market.