When it comes to buying stocks, Billy N. Joyner's advice is: "Buy a piece of a good business."

Joyner, portfolio manager for the new Growth Fund of Washington, has spent the last two months grappling with the awesome task of investing $28 million in area stocks. After reviewing dozens of candidates, Joyner picked 18 companies he believes meet the "good business" standard. Most would be considered the blue-chip stocks of the Washington area.

Joyner's choices fall into six industry groups. Banks are his largest holding. They include American Security Corp., Baltimore Bancorp, First Maryland Bancorp, Maryland National Corp., Mercantile Bankshares Corp., Riggs National Corp., Suburban Bancorp and Dominion Bankshares.

His investment in Suburban Bank, made prior to the bank's decision to merge with Sovran Financial Corp., will give Joyner a 22 percent gain.

Washington-area banks, which Joyner said meet his good-business test, have seen their stock prices rise substantially during the last year -- partly because of improved earnings but also because of the wave of merger fever. There may be even more growth potential for the banks as the merger game continues.

Joyner looks at the banks, however, as defensive stocks: "I didn't expect any terrible news" when the banks reported third-quarter earnings. Bad earnings news generally means lowered stock prices and, in turn, a drop in the net asset value of a mutual fund's shares.

Beyond the banks, Joyner invested in three aerospace and military technology companies, Martin Marietta Corp., Atlantic Research Corp. and Systematics General Corp. That will change because Atlantic Research recently acquired Systematics General.

Giant Food Inc.(A) and Hechinger Co. (A), are Joyner's two merchandising sector stocks, while CSX Corp. and USAir Group Inc., are his two transportation holdings. Uslico Corp. is his only insurance industry holding while Gannett Co. and The Washington Post Co. (B) are his media choices.

Washington Post stock is Joyner's largest holding, about 14 percent of his portfolio. The fund holds about 40,000 shares that it bought, Joyner said, at an average price of $115, only to watch the stock dip to about $103. WPOB closed Friday at $115.25. In a letter to shareholders, Harry J. Lister, president of the Growth Fund, called The Post "one of the best businesses in the area, if not in the whole country."

Joyner, a vice president at Geico Investment Services Co., the Growth Fund's adviser, said he had not invested -- at least yet -- in any small companies. Before making any such investment, he said, "You'd better be sure that the business can survive."

Noting that not all of his selections meet all of his own criteria, Joyner nevertheless said a "good business" should have these elements:

*A leading position in an attractive industry.

*A top-notch product.

*Pricing flexibility.

*An ability to develop new products and markets.

*Low labor costs.

*Low exposure to social, political and environmental pressures.

*A strong financial position and conservative accounting.

*Evidence the company is plowing money back in its business.

One way to tell if a company is meeting most of these criteria, Joyner said, is by its return on stockholders' equity. If that figure is higher than average, the chances are that company's business is going well. Many -- although not all -- of the companies in the portfolio are above average.

For better or worse, the Growth Fund opened its doors at a time when many Washington-area stocks were at, or close to, their five-year highs. Joyner said that didn't worry him. "I would worry more if the PEs price-earning ratios were out of line," he said. As it is, he said, the PEs of Growth Fund companies are running at 11 or 12 times earnings, which he considers to be in a medium range. The universe of stocks covered by Value Line Investment Survey, he noted, has a current PE average of 11.3.

The Growth Fund opened at $10 a share but after the 5 percent commission was deducted, $9.50 became the fund's par. The net asset value of the shares on Friday was $9.48 bid. The fund, developed by Johnston, Lemon & Co., carries a "distribution fee" of 0.25 percent, which covers promotion costs and a management fee of 1 percent. The minimum investment is $1,000 and subsequent investments must be at least $50.

While Joyner has been picking stocks, Joseph A. Clorety II, portfolio manager for the Washington Area Growth Fund (WAG) has been busy monitoring his own group of regional issues. The WAG fund, which opened for business in June, with $1 million, now has almost $6 million. It is operated by the Calvert Fund, a subsidiary of the Acacia Mutual Life Insurance Co. of Washington.

Clorety has put his dollars into 27 area stocks, with his biggest investments -- about 5 percent each -- going into Federal National Mortgage Association (Fannie Mae), Hechinger Co. (A and B), Martin Marietta Corp. and Potomac Electric Power Co. Clorety is very bullish on Fannie Mae. "The biggest puzzlement," he said, "is why the rest of the world doesn't see them the way I do." Fannie May, he said, has made "great strides" in strengthening its financial position and he expects "extremely good earnings." Moreover, he believes that "providing funds for the residential market is a growth situation."

Clorety, vice president for investments at Acacia, said that the original philosophy was to invest in "large success stories and small emerging companies," but he had broadened that to include some special comeback situations, such as Fannie Mae, Circuit City Stores and Best Products. These are stocks, he said, that "down the road a year or two will look very good."

Clorety tries to pick stocks on a value basis. "We're looking for relatively low price versus value. That's our bias," he said. On the other hand, he noted, "There are a lot of stocks where the price may be high but the prospects are excellent."

Clorety's other stocks include: Atlantic Research Corp., Entre Computer Centers Inc., General Physics Corp., Giant Food Inc., Heilig-Meyers Co., James River Corp., Marriott Corp., Maryland National Corp., McCormick & Co., Overnite Transporation, PHH Corp., Radiation Systems Inc., Robertshaw Controls Co., Student Loan Marketing Association (Sallie Mae), Suburban Bancorp, Systematics General Corp., USAir Group Inc., Universal Leaf Tobacco Co, Vie de France Corp. and The Washington Post Co.

The WAG fund has no upfront commission, but it contains a "contingent deferred" charge. That means the investor pays a fee of from 6 percent to 1 percent if he or she withdraws money within the first six years. The fee drops by one percentage point each year. There is also a "distribution fee" of 1.25 percent a year, and a management fee of 0.7 percent. The minimum investment is $2,000 and subsequent investments are $250.

The WAG fund opened at $15 and its Friday price was $15.04, down from its July 17 high of $15.76.

Stocks of many Washington-area companies have performed well during the last year. Now, an estimated 7,000 to 8,000 investors in both area funds are betting these companies will continue to do well. Time will tell whether they will be rewarded.

The Washington Real Estate Investment Trust has decided to sell 1 million shares of beneficial interest. With current shares selling at about $18 each, the new public offering will bring in about $18 million. Proceeds of the sale will be used to purchase income-producing properties, improve existing properties and provide working capital, the company said. Alex. Brown & Sons and E. F. Hutton & Co. will co-manage the proposed offering.

Eleven Washington-area companies have made the Forbes magazine list of the 200 best small companies. The Forbes yardstick was an 11.2 percent return on equity over five years, relatively low debt and consistency in earnings growth. The winners were: Atlantic Research Corp. of Alexandria, Avemco Corp. of Frederick, BDM International Inc. of McLean, Cerberonics Inc. of Bailey's Crossroads, General Physics Corp. of Columbia, Heilig-Meyers Co. of Richmond, Insituform East Inc. of Landover, Legg Mason Inc. of Baltimore, O'Sullivan Corp. of Winchester, Universal Communication Systems of Roanoke and Waverly Press of Baltimore.