Where To Place Your Massachusetts Technology Bets

First quarter U.S. Gross Domestic Product (GDP) growth came in at a disappointing 1.8%. But some states enjoyed much faster economic growth -- among those is my home state of Massachusetts whose economy spiked 4.2% in the first quarter. And that faster growth is based on its high tech companies. Here are three stocks likely to benefit from that faster-than-average growth.

Behind that slow U.S. GDP growth were some surprising bits of positive news. Businesses spent 11.6% more on equipment and software, exports rose by 4.9%, and consumers, who account for 70% of GDP growth, boosted spending at a 2.7% annual rate.

That good news was offset by bad news in real estate and government spending. Investment in housing was down 4.1%; investment in commercial real estate tumbled 21%, and government spending declined 3.3%.

But the best number of the bunch -- the 11.6% rise in technology spending -- benefits Massachusetts significantly. Local economists attribute the state's 4.2% GDP growth to its leading companies getting an above average share of that corporate investment.

There are many Massachusetts-based companies that likely received a good share of that spending. Here are three:

• EMC Corp (EMC), a maker of data storage hardware and software, that reported first quarter earnings growth of 28% to $477 million on 18% revenue growth to $4.61 billion
• Thermo Fisher Scientific (TMO), a designer and builder of scientific instruments, that reported first quarter earnings growth of 8.5% to $252 million on 3.6% revenue growth to $2.7 billion
• Analog Devices (ADI), a semiconductor manufacturer, that reported first quarter earnings growth of 83% to $222 million on 21% revenue growth to $729 million

Using the trusty Price/Earnings to Growth (PEG) ratio -- a measure of how a stock's market valuation compares to its growth prospects -- I will rank these possible plays on Massachusetts' growth rate from lowest to highest PEG:

• EMC 1.63. At a P/E of 31, its earnings are forecast to grow 19% to $1.42 in 2012
• Thermo Fisher 1.92. Its P/E is 23 and its earnings are forecast to grow 12% to $4.55 in 2012
• Analog Devices 2.23. Its P/E is 15.4 and its earnings are forecast to grow 6.9% to $2.96 in 2012

Of these three, EMC looks to be the most likely to profit from the ongoing trend of corporate technology spending. If the more expensive Analog Devices can continue to boost earnings at the rate it did in the most recent quarter, its stock price could benefit.