Local stocks set to soar as buyers devalue snob appeal; trend away from name brands sets stage for value goods.

Several Los Angeles companies may see a boost in stock prices as investors scramble to find so-called "value" companies while avoiding firms like Procter & Gamble, which specialize in more costly name-brand products, analysts said.

The trend away from name-brand product companies has swept the stock market in past weeks, with investors shunning firms like Procter & Gamble and Philip Morris and shifting toward companies which offer value products -- defined as either cheaper, generic brands or specialty products, such as health foods.

The trend crystallized on April 2, when Philip Morris slashed prices on its cigarettes due to increase competition from generic brands. As a result, stock prices of the company took a tumble along with other heavyweight brand name marketers, including Colgate-Palmolive, Campbell Soup and Dole Foods.

Like all trends, some analysts agree while others do not. But those analysts who predict the trend away from major name-brand companies will continue say investors could find some good stock picks right here in Los Angeles.

Local companies which could benefit include: Chatsworth-based St. Ives Laboratories, Inc.; Rancho Dominguez-based Dep Corp.; L.A.-based Viking Office Products; and Smart & Final Inc, a wholesale product company headquartered in Santa Barbara, but with a significant presence in Vernon. Also potential winners: Vons Companies Inc., based in Arcadia, and Compton-based Ralphs Grocery Co., which has considered going public. Both stores offer their own brands of lower-priced products.

Martin Cosgrove, an analyst with Wedbush Morgan Securities in Los Angeles, agreed that tightfisted consumers will continue to look for value products, and as a result he is recommending St. Ives, a local company which specializes in lower-priced beauty products.

Cosgrove expects the company, with sales up 19 percent in the first quarter from last year, will continue to swipe market share from national advertisers of shampoo and skin care products like Procter & Gamble.

"We consider St. Ives to be a company which will benefit from people trading down a bit in price," said Cosgrove. "Simply, the company is offering a quality product at cheaper prices. They have come in as a lower-cost substitute for national advertisers."

The company's stock closed at $9 per share last Monday and could reach $11 to $12 per share by year-end, he said.

Although Wedbush holds a small position in St. Ives' stock, Cosgrove has a criticism of the company, saying that St. Ives is not aggressive enough in marketing itself. He noted that the stock is very thinly traded.

Several analysts predicted local company Dep Corp. could see a boost from the bargain/specialty trend because, like St. Ives, it specializes in low-cost beauty and shampoo products. The company's L.A. Looks hair products are cheaply priced.

Theresa Matacia, an analyst with Sutro & Co., a San Francisco-based investment firm, said she sees a boon for stock prices of Viking Office Products.

Matacia predicted Viking stock -- currently at $30 per share -- could reach a $38-$39 per share high by the end of the year. The company, a leading direct mail marketer of office supplies, targets small to mid-sized businesses with products priced 30 to 50 percent below manufacturers' retail prices.

Matacia recently authored a report heralding the 1990s as the "value decade" and noted that consumers are placing more importance on value and will be reluctant to spend, instead focusing on finding the best value for their money.

"It's a trend which is going to accelerate, if anything, over the next five years," Matacia said. "Consumer buying trends are shifting."

Also expected to see stock price boosts are local grocery stores, not only because such stores offer their own brands of low-cost products but because supermarkets control display space where such products can be pushed on consumers, predicted Jean-Michel Valette, an analyst with Hambrecht & Quist, a San Francisco investment firm.

"In the L.A. market in particular, the supermarket arena is very concentrated," said Valette. "A large portion of products in L.A, are bought in supermarkets and there are fewer supermarket companies," which is why Valette predicted both Ralphs and Vons could see benefits if, say, consumers buy a Vons brand loaf of bread rather than a name brand.

"In a downward economic trend, consumers will tend to trade down. Proper management of this trend can help margins," said Alan Reed, chief financial officer with Ralphs. The company has shelved, for now, plans for a public stock offering.

Dan Winter, an investment executive with PaineWebber Inc. in Los Angeles, said while he predicts the trend away from brand names will not continue because "brand-name companies can always cut prices," he sees a boost for several locals, including Dep and Smart & Final, which supplies low-cost wholesale goods to consumers, often small to mid-sized restaurants. The latter company's stock closed at $18.50 per share last Monday.

Like Winter, another analyst doubting the trend's lasting impact is Mark Matheson, an analyst with Crowell, Weedon & Co., an L.A. brokerage firm.

"If anything, we're going to move back toward the good stuff (more expensive name-brand products). This is a trend that is 18 months too late," he said.