After hitting historic highs in November to cap a great 1996 run, the stocks of brokerage firms may face a different climate next year, analysts say.

Brokerage stocks have soared 29% this year, outperforming the Standard & Poor's 500 by almost 50%, according to Brown Brothers Harriman & Co., which tracks seven "bulge-bracket" securities firms.

"Its a feast or famine business," said Charles M. Vincent, a financial services analyst in Philadelphia with PNC Institutional Investment Services. "It has high levels of fluctuation, highly liquid balance sheets, and much volatility."

Brokerages, which this year have harvested the profits from the market's exuberance, are viewed as"high beta" stocks, which move with the market, often with major swings.

Beta coefficients measure a stock's relative volatility. The S&P 500 has a beta value of 1 and stocks with higher betas are thus more volatile than the market. Most brokerage stocks have beta values of 1.4 to 1.8, according to analysts.

"Ownership of these stocks is a proxy for the market itself," said Perrin Long, an independent investment adviser. "Investing in brokerage stocks is making a bet that the market is going to be higher over time."

With earnings predicted to be flat next year, most analysts say that it will be a different time for brokerage stocks, "We've reached a plateau in the cycle, and 1997 is going to be a more difficult year." Mr. Vincent said.

Another market observer agreed that brokerage stocks are "at the higher end of their historical valuation range. The next year will be less buoyant."

But the longer-term outlook is viewed as bright.

Demographic shifts in the investment environment have fueled this sentiment. New movement into 401(k) programs, the aging of the baby boomers, and the increased amount of investors in the marketplace as a whole have created good long-term prospects for the industry.

Eventually, some industry watchers think, the rapidly growing business of asset management and the revenues it generates could help reduce the notorious volatility of brokerage stocks.

Of course, many significant challenges remain. The Federal Reserve Board's recent decision to raise the percentage of total revenue commercial banks may derive from securities underwriting to 25% from 10% will have mixed ramifications for the securities firms. While consolidation is a possibility, the ruling only adds more competition to a marketplace that is already overcrowded.

Major acquisitions of brokerages by commercial banks seem unlikely because of contrasting corporate cultures and because brokerages, which have lower price-to-earnings ratios than banks, could bring down bank stock valuations.

"While banks continue to consolidate, generating head count reductions in a meaningful way, the brokerage industry is so loaded up with people that it creates tremendous overhead," noted Fred Meinke, an analyst with CoreStates Financial Corp.

Finally, the Fed ruling paves the way for commercial banks to build up their securities-related activities internally.

But some analysts assert that the Fed's ruling makes some regional brokerages ripe for potential acquisition. Indeed, shares of Baltimore- based Alex. Brown & Sons soared on takeover speculation earlier this month.

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