This tale might be called "The Return of MIW Investors of Washington." If the name sounds familiar, it's because MIW is an old Washington real estate investment trust (REIT) that fell on hard times, managed to survive and was able to find a new and prosperous direction for itself.

In its second life, MIW has evolved into a rapidly growing savings and loan company doing business in several of Virginia's fastest-growing areas, including Northern Virginia, Virginia Beach and Charlottesville.

The rebuilding of MIW, which has been under way for some time, began to attract the attention of investors last year when MIW acquired First American Savings and Loan Association of Woodbridge. That interest was sparked again in recent months when MIW bought a second Virginia thrift, Suburban Savings and Loan Association of Annandale.

MIW stock, as low as $1.88 a share during the last five years, was selling at $5 a share on Jan. 4. From there, the price of MIW wandered around a bit, finally getting up to the $7 mark and lingering there until recently when the stock started on a hot streak.

MIW, which often trades less than 20,000 shares a week, leaped to a volume of 144,000 shares and went up in price from $6.88 to $7.50 between Oct. 25 and Nov. 1. Volume grew to 173,000 shares and the price rose from $7.50 to $8.25 between Nov. 1 and Nov. 8.

Finally, between last Monday and Friday, the price went from $8.25 to $9.13 and back down to $8.75 on a volume of 138,800 shares.

In short, the three-week run took MIW stock from $6.88 to $8.75, a gain of 27 percent on a huge volume of 455,800 shares. Most of the trading in MIW stock has been taking place at Johnston, Lemon & Co., a regional brokerage house that is one of several firms making a market in MIW stock. MIW stock has been strongly recommended to institutional investors by Emanuel J. Friedman, the savings and loan analyst at Johnson, Lemon.

While the MIW run may slow for a while, it appears that it's not over yet. The stock's potential is likely to keep the market hot for some time to come.

Meanwhile, MIW's 6-percent convertible-preferred issue, convertible to 3.5 shares of common stock, also has been rising, moving up in lockstep with the common shares.

Sitting back and enjoying this scene is William H. Savage, the president of MIW Investors, who has presided over the turnaround of his company and its entry into the savings and loan business.

"My S&L advisers," said Savage, "say that MIW is the best-kept secret around because nobody recognizes it is really, basically, a thrift, and not a moribund real estate investment trust."

Savings and loan analyst Friedman agreed. "It is an overlooked S&L. No one follows it. No one knows it. No one lists it," he said. For that and other reasons based on the thrift's business fundamentals, Friedman said he has told institutional investors that MIW "is undervalued, relative to the group."

If MIW seemed to fade from sight for a time, it was only temporary. MIW began life in 1969 as Mortgage Investors of Washington, a REIT dealing in short-term construction lending. The trust was successful in its early years and total assets reached $120 million.

In the mid-1970s, however, MIW was all but crushed by a wicked recession, steep inflation and rapidly rising interest rates. Builders and developers suffered huge losses and went under, forcing MIW to liquidate properties it acquired through defaults and foreclosures.

In 1980, MIW had repaid some $80 million in bank loans, but still faced the problem of paying off $15 million in publicly held floating rate bonds.

MIW found its answer by getting help from foreign investors, particularly from Dutch funds and other interests. They poured $15 million into MIW to help rescue the company. Today, foreign investors own about 41 percent of the company's common stock.

The final step in the MIW turnaround came in 1984, when MIW acquired First American Savings and Loan. That was followed this summer by the purchase of Suburban Savings and Loan Association.

Together, MIW and its two savings and loans have assets of about $731 million and soon will have 30 offices inside and outside the beltway. First American Savings and Loan, which is not related to First American Bank, had most of its offices outside the Beltway and, in fact, did one-third of its loan business in Virginia Beach. Suburban Savings and Loan had most of its branches inside the beltway.

An analyst who took a recent look at MIW is Roger G. Powell of Alex. Brown & Sons in Baltimore. "It's unusual to find a company that has repositioned itself to the degree that MIW has," Powell said. "I'm not hot on the stock either way, but it has a lot of potential, it has an impressive management and it has a valuable franchise in the thrift and the real estate business."

Powell said he thought it would be the second or third quarter of next year before the financial dust from the MIW, First American and Suburban mergers settled sufficiently to produce a "normalized set of financials." Calling MIW a "real estate merchant bank operation," Powell said he foresaw a high-risk, high-reward scenario in some of the MIW's development projects but felt the risks were tempered by the experience of management and the strength of the economy in the Washington metropolitan region.

"The earnings are not entirely predictable but the trend is positive," Powell said.

Investors were given a glimpse into MIW's future earnings when the company filed its federal application to acquire Suburban. At the time, MIW estimated that its two thrifts would earn about $1.18 a share for this year and $1.53 for 1986. When a little bit is added for MIW, itself, the estimate comes to about $1.20 to $1.30 a share for this year and $1.60 to $1.70 a share for 1986. MIW reported primary earnings of 90 cents a share for 1984.

Analyst Friedman said he thought that 1986 earnings could go as high as $2 a share.

If this sort of earnings growth is realized, MIW stock prices could rise steadily. Alex. Brown recently reported that the savings and loans it follows are selling for 7.4 times 1985 earnings and 6.4 times 1986 earnings. At 7.4 times estimated 1985 earnings of $1.30, MIW shares would sell for $9.62. At 6.4 times estimated 1986 earnings of $1.70 a share, MIW stock would sell for $10.88.

The way Savage tells it, the idea of putting MIW into the savings and loan business made total sense. If MIW had invested only in real estate, it might have earned perhaps 8 to 10 percent. In the S&L business, it could earn 20 to 25 percent on its money.

If there was motivation, there also was opportunity. When MIW began thinking about buying First American back in 1982, the thrift business was at its lowest ebb, meaning that it wouldn't be too hard to buy a good thrift institution at a decent price. But it also meant that, eventually, the thrift business was likely to turn around. With the drop in interest rates, the thrift industry is rallying nicely.

In the case of the Suburban acquisition, there also was the attraction of two high-rise office buildings, which MIW acquired. They were carried on Suburban's books for $8.5 million but have been appraised for $16 million. MIW paid only $16 million for all of the Suburban operation.

Now that it's in the thrift business, there are a lot of ways MIW could proceed, including getting into the business of making business loans. Savage will have none of it. He believes in doing what he knows best, and that means sticking to real estate development. That's where he has spent his career and that's where MIW will stay, he said. It permits MIW to take advantage of its experience in real estate and its ability, as an S&L, to borrow money from the federal government for real estate projects at about 2 or 3 percent less than typical real estate investors must pay.

As history proves, the real estate business and the savings and loan business both have their risks. Savage believes it is the job of MIW and its thrifts to properly manage all those risks and still succeed.