(FORTUNE Magazine) – Stocks of companies that make famous brand-name products -- once a virtual guarantee of success -- have floundered since the beginning of the year. The roster of losers reads like a grocery clerk's inventory list. Coca-Cola (see cover story) off 7%. Gillette down 8%. Procter & Gamble down 10%. PepsiCo down 10%. Gerber Products down 11%. Sara Lee down 15%. So much for brand loyalty. Some analysts think the selloff has gone too far. It started when investors betting on economic recovery began shifting money into cyclical stocks, such as autos and steel. Then Philip Morris cut the price of Marlboro, its No. 1 brand, to halt a loss of market share to generic cigarettes, and the selloff became a stampede. Investors concluded that many brand names were imperiled; Bill Leach, an analyst at Donaldson Lufkin & Jenrette, says they were wrong: ''This whole phenomenon is totally blown out of proportion. In food and beverages, generics and private labels have been around for some time.'' Cigarette makers were particularly vulnerable, he argues, because they had jacked up prices in the face of declining demand. But do not rush blindly back into consumer stocks. Companies that own second-tier brands, such as Dial Corp, maker of Dial soaps and Armour Star canned meats, may indeed get squeezed by private-label rivals, analysts say. But many companies, faced with generic competition, are fighting back. Take Procter & Gamble. Says Morgan Stanley analyst Brenda Lee Landry: ''P&G recognized the threat of store labels way ahead of the crowd.'' The company uses technological innovation to maintain its edge. For example, the latest formula for Cheer laundry detergent includes a state-of-the-art enzyme that protects color in fabrics. At the same time, P&G has pushed down costs, so it can introduce innovations without raising prices. Operating margins, says Landry, will be the highest in a decade. The stock sells for $48, or 15 times her estimated earnings per share for the June 1994 fiscal year. Companies that keep prices low will have an advantage. Of PepsiCo's Frito- Lay division, Leach says, ''They've taken out so many costs and kept prices so low that they've almost bankrupted their competitors.'' He thinks the stock, which trades for $37, will hit $46 by year-end. Another efficient manufacturer, Sara Lee, is a power in both food and apparel. Its Hanes division and archrival Fruit of the Loom dominate the underwear market. ''You can't underprice them,'' says Carol Lintz of State Street Research & Management in Boston. Sara Lee recently sold for $26 a share, 16 times estimated earnings for the fiscal year ending June 1994. Companies with strong international franchises are less vulnerable to generic competition, contends Les Pugh, food analyst at Salomon Brothers. ''By operating internationally you generate economies of scale, which you can use to bolster your brands by innovation and promotion,'' says Pugh. He especially likes Nestle, the Swiss food giant. Its ADRs trade over the counter and recently sold for $78, or 14 times Pugh's estimated earnings for 1993. Raymond J. Urban, strategist at Duff & Phelps Investment Research in Chicago, says investors underestimate General Mills. He believes that the maker of Cheerios and Betty Crocker mixes will achieve 13% average annual earnings growth in the next five years -- and that the stock, which now sells for $67 a share, is worth $80. Of course, some makers of products will continue to thrive. Shares of Cott, a Canadian maker of store-brand sodas for Wal-Mart and other retailers, have risen 36% this year, to $34. Earnings should go up at least 50% annually, says Oppenheimer & Co.'s David Goldman, who recommends the stock.