Regional Brokers

JUST about everyone is familiar with Merrill Lynch's thundering herd, and you may recall that when E. F. Hutton talked, you were likely to get the soup in your lap because your waiter was listening. But a growing number of investors are turning their ears to lesser known regional brokerage houses. They can get you into the stocks of small local companies that are among the fastest growing in the country.

Regional firms often specialize in fairly small companies with strong managements. Some firms limit their bailiwick to a single city; others specialize in regions for example, growth companies of the Midwest or Southwest. Analysts read the local papers, understand the local economy and continue to follow local companies even if they temporarily fall out of favor with investors.

These brokers tend to have strong and deep ties to their region. Many began as municipal bond houses handling underwritings for towns and small cities too insignificant to be noticed by national firms. Gradually, the regionals branched out into selling common stocks as well.

If you think the economic prospects are bright for companies in a specific part of the country, a long distance call to a regional broker will get you a sampling of current research reports. If you like what you see, you can open an account, also by phone, and start receiving monthly market letters with regional economic forecasts and lists of recommended stocks.

Many regional brokerage houses have notable records of performance. In the East, for example, are Adverts in Hartford, Connecticut; Legg Mason Wood Walker in Pittsburgh; and Baker, Watts & Co. in Baltimore. In the South are Interstate Securities in Charlotte, North Carolina, and Robinson Humphrey in Atlanta. In the Midwest are Cleveland's Prescott, Ball &Turben, and Milwaukee's Robert W. Baird & Co. In the West and Southwest, there are Rauscher Pierce Refsnes of Dallas, Boettcher & Co. of Denver, and Crowell, Weedon & Co. in Los Angeles.

To find other regional firms, one good source is a Standard & Poor's guide called Security Dealers of North America. It lists securities firms, their addresses and phone numbers, by city and state.

When these firms venture out of their regions, it usually is to cover the competitors of local companies. Their analysts keep turning up small companies that have fast expanding markets and earnings. Gradually the glitter of these little stars will attract attention by national firms. That is the regional analyst's dream: finding stocks, getting clients into them early, then waiting until a big national firm discovers them, recommends them and sends the price up.