MCI Communications Corp. Chairman William McGowan told a local group of investors Saturday that MCI's residential long distance telephone service is growing as fast as the firm can install the transmission equipment.

The demand is so great that the firm is "artificially" limiting new residential customers to those who make at least $25 worth of long distance telephone calls per month, McGowan said. "We would go into cardiac arrest" if MCI tried to serve everyone who wants it, he added.

Even with the limit, MCI is picking up 50,000 new customers a month, he said. By year's end, MCI expects to have 600,000 residential customers. As a result, MCI has doubled this year's capital budget to $550 million from last year's $230 million, McGowan told the Washington area council of the National Association of Investment Clubs. MCI first offered household long distance service in 1980.

The 300 investors at the fifth annual Washington Investors' Fair also heard from three other high growth public companies: Atlantic Research Corp. and Manor Care Inc., both of the Washington area, and W. R. Grace & Co. of New York.

Each of the four companies laid out their growth records of 20-plus percent over the past few years and pointed out the sources of big future growth.

The audience was made up largely of investors who belong to investment clubs whose average size is 15 members, and who jointly contribute to a club fund that is directed into stock investments by majority rule..

McGowan told the group that long distance service would continue to grow so fast that there will be room for many competitors. He projected that by 1985, demand for long distance service would double its 1980 rate, becoming a $65.2 billion industry. MCI currently has 2 percent of the market. All other non-Bell long distance companies have another 2 percent, he said.

The firm has also positioned itself to serve overseas voice communication, mobile telephone and data communications markets with its purchase in December 1981 of Western Union International Inc. WUI Inc. has licenses with the overseas telephone companies, an important entree to that market.

Within a year, MCI should be able to offer cheaper overseas voice service than is currently available, McGowan said.

MCI will probably get its own satellite for voice transmission in about three years, McGowan continued. MCI now delivers its service via microwave towers placed at 20 to 60 mile intervals across the country. Satellites are more economical than microwave for calls traveling more than 1,000 miles, he explained. MCI's average call now goes only 500 miles.

The company may get a big boost in income from a $1.8 billion civil antitrust award won from AT&T in a case decided by a Chicago jury in June 1980. The award is under appeal and McGowan said he expects a decision before the judicial summer recess.

In the meantime, the award is earning interest at a rate of $3.1 million per week, McGowan told the investors. He wouldn't predict that MCI would actually collect, but claimed jury decisions are overturned only 20 percent of the time.

The MCI chairman also described how he thought telephone service would be delivered two years from now, when the planned breakup of AT&T is expected to be complete.

Customers will be able to choose long distance service from Bell or a competitor like MCI. Customers may not have to dial the 12 extra numbers now required on MCI calls because the local telephone companies will be required to cooperate with MCI on billing, McGowan said.

Atlantic Research Corp. Chairman Coleman Raphael told the group his company is working on a project that could produce boiler fuel from coal for about half the price of heavy oil.

The process produces a synthetic oil suitable for power plants by mixing finely ground coal with water. However, the method is about 100 years old, and not patentable, Raphael said.

The company is seeking patents on two additives used by ARC to preserve the slurry and to improve viscosity. Research is continuing on improving combustion technology and on reducing the ash content of coal used to make the slurry, an ARC spokesman added.

ARC is currently building a $2 million demonstration plant, and negotiating with several utilities that want to burn the fuel. A much larger $120 million plant would be needed for commercial production, Raphael told the investors.

The basic business of the Alexandria-based company is producing solid rocket fuel for defense contractors. It is also a diversified research firm.

In the defense area, ARC makes propellants for the Trident submarine-launched missile, for a surface-to-air missile called the Stinger, an Army artillery rocket, the booster for the cruise missile and propellant for an anti-tank weapon called the Viper.

Raphael expects the Viper will soon produce the most defense-related sales for the firm, with annual revenues of $15 million to $20 million when it is in full production. It takes a small, low cost propellant, he said, adding, "we'll be building this like Coca-Cola bottles."

However, the Viper came under attack for cost overruns last year in the Senate Appropriations subcommittee on defense. Raphael said that the weapon, which is built by another contractor, is now more sophisticated than originally designed, creating cost overruns. In a compromise, Congress agreed to start production of the Viper this year, and required a "shootout" to compare performance with similar weapons before full production. Raphael said the Viper would win such a contest.

According to Raphael, another area of high growth for the company has been in devices that find problem areas in data communications networks. The equipment is used by hotel chains, airlines, credit card companies and others that rely on instant communications among computers to speed customer services.

In 1981, ARC had sales of $23 million from the testing equipment. Raphael said ARC is putting two new testers on the market because "we saw competition coming from all sides." A new low-cost model will be unveiled in Houston today.

Still in the research stage is a process for destroying highly toxic industrial compounds like PCBs and Kepone, which are very difficult to incinerate, and remain toxic for many years.

The patented process, called light activated reduction of chemicals, uses ultraviolet light to weaken chemical bonds. In the case of PCBs, hydrogen is added, absorbing chlorine from the PCBs.

Raphael said PCBs collect in oil used in transformers by power companies. If the process becomes commercially workable, he said, the day may come when an ARC van would go to an electric plant and pour transformer oil into an ultraviolet vat. The cleansed oil would come out the other end.

ARC is seeking Environmental Protection Agency approval for a demonstration project, Raphael said. However, he added, "We're not sure that as soon as we're ready, there may not be some cheaper way" to destroy the chemicals, making ARC's process uneconomic.

Manor Care Inc. President Jack Anderson told the investors that with the acquisition of Quality Inns International Inc. in 1980, his health care company is now "well anchored in two basic businesses which are growing faster than the GNP."

According to Quality Inns' President Robert Hazard, his is the fastest growing chain of hotels in the nation. It will grow from 309 hotels last year to a projected 500-hotel chain by the end of 1982. Hazard said the firm aims to have more than 700 hotels by the end of 1983.

"We're also out to change the image of Quality Inns," Hazard said, from that of the "road side" accommodation. There actually will be three chains: Comfort Inns for the economy-seeker, Quality Inns for the middle income American who wants "no surprises," and Quality Royale, a luxury hotel concept catering to the expense account crowd.

Hazard said the conventional wisdom is that this is a bad time to get into hotels because of the recession. But, with lower gas prices and the influx of some 23 million tourists from other countries in 1982, this summer will be a good one for the business, he said.

The basic business of Manor Care is nursing homes, however. Anderson said despite its number four position among nursing home chains, Manor Care draws more private paying patients than any other. That means a better return per client.

Anderson said some analysts question Manor Care's combination with Quality Inns. The combination is worthwhile because hotels can be acquired and are "people intensive," while nursing homes must be built and are "capital intensive," he reasoned. So, even with high interest rates, when construction of new nursing homes is difficult, Quality Inns can grow aggressively "without substantial amounts of additional capital."

Anderson announced the company plans to dispose of parts of another recently acquired company, Cenco Inc. Manor Care has $100 million of outstanding debt left to pay on $170 million borrowed to buy Cenco. Anderson said selling parts of Cenco will cut the debt in half.

W. R. Grace's Director of Investor and Shareholder Relations James Stier told the group that despite low returns on fertilizer and consumer areas, Grace is turning in a good performance. After-tax net income has grown from $150.2 million in 1977 to $361.3 million in 1981, he said.

Consumer services like restaurants produced a return on investment of less than 10 percent last year, he said. The firm wants to get that up to 15 percent and will dispose of the low performers among them, Stier added.

The return on investment in agriculture has been going down, but he said cutbacks in fertilizer imports from Russia and Mexico could help correct that.

However, about 90 percent of Grace's business is in specialty chemicals and natural resources, Stier told the group. Those two areas have been doing well.