The O'Neil Strategy Picks Five Pricey Winners

Syntel (SYNT Quote - Cramer on SYNT - Stock Picks), which provides IT consulting and services, has a stock price that's just 4% below its 52-week high. Earnings growth over the past five years has been 18.76% annually, while EPS has gone up in four of the past five years. The stock's relative strength is a strong 89, and its industry -- computer services -- has 80 companies with a relative strength above 80, indicating this is a very desirable industry. Plus, return on equity is 32.2%, nearly double the 17% minimum set by the strategy.

The last company on today's list is Diamond Offshore Drilling (DO Quote - Cramer on DO - Stock Picks), a major provider of offshore contract drilling services. This company's stock price is just 2% below its 52-week high. Annual earnings growth has been 32.39% over the past five years and EPS has increased in each of the past five years, showing good consistency. Diamond's relative strength is 87; its industry, oil well services and equipment, has 42 companies with a relative strength at or above 80. Debt is low, while return on equity is a gusher at 36.9%.

The O'Neil strategy, with its emphasis on seeking quality and momentum instead of looking for undervalued stocks, is not for everyone. His strategy goes against the common wisdom (such as "buy low and sell high"), and I find it to be more volatile than most. However, O'Neil has been publishing his Investor's Business Daily for years, he has written a number of books, and his following appears large. I believe he is worth paying attention to.

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