Facebook, Apple or that social media ETF?

Drew Voros, editor-in-chief, ETF.com
Philippe Lopez | AFP | Getty Images

Last week the $800 billion gorilla in the room, Apple, announced its quarterly earnings, and before they reported its typical monster numbers, there were the stories that have become almost routine, such as, "ETFs to play if you're bullish on Apple."

I'm sure we here at ETF.com have been guilty of going down that road, being all-ETF, but placing blind faith into that kind of tunnel vision isn't always the right move. While passive investing has been proven to be superior over time to stock picking, time frames are important.

However, if you're truly bullish on Apple, shouldn't you just buy its stock, and move on from trying to figure out which ETF is the best for your bullish Apple feelings?

That's a good question, with no clear answer — unless there's a time line.

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The general tech sector is a tougher nut to crack in terms of picking winners, and certainly Apple has seen some backsliding in the past, so holding, say, the Technology Select Sector SPDR Fund (XLK) rather than being all-in on Apple might make sense — again, depending on your time line.

Apple is burning up the performance charts this year, and no doubt contributed to the returns of XLK as its top holding, at 15 percent. But as reflected in the chart above, XLK is lagging Apple's year-to-date gain by almost half. The two-year chart of Apple versus XLK, though, tells a different story. XLK is up 34 percent to Apple's gain of 22 percent.

That's the thing with tracking performance of any investment: What time frame are you viewing it through?

This back-and-forth continues, looking at these two in a three-year chart. Apple is up 83 percent to XLK's 58 percent.

Facebook vs. SOCL

Another earnings-season headline grabber is Facebook, which is like Apple when it comes to blowing out its earnings report with more beats than Dr. Dre.

And inevitably, when Facebook is about to report earnings, we will get similar stories to that of Apple: "ETFs to buy If you're bullish on Facebook."

The Global X Social Media ETF (SOCL) is as advertised, and tracks a modified market-cap-weighted index of social media companies. For this year, Facebook and SOCL are neck-and-neck.

But as we saw with the Apple/XLK comparison, the one year chart sees SOCL significantly outperforming Facebook by nearly twice as much: 48 percent to 27.55 percent.

The two-year chart flips again, and by a lot, where Facebook registered 97 percent versus 39 percent for SOCL.

Charts courtesy of StockCharts.com

What's an investor to do?

The point of this chart exercise was to show how hard investment choices can be if you are looking at past performance to make a decision: Do you buy a stock leader like Apple or Facebook, or an ETF that has a heavy weighting in stocks such as those?

One point of perspective is to look at the largest U.S. public companies 10 years ago compared with today: Wal-mart, Exxon, GM, Chevron … versus today's biggest U.S. public companies: Apple, Alphabet (Google), Microsoft, Berkshire Hathaway.

Don't put Apple in a box: Trader

While it may seem impossible that Apple or Google or even Facebook would fall from the graces of the biggest U.S. companies list, the same was thought about GM: "As GM goes, so goes the country."

If nothing else, ETFs like XLK or SOCL offer you diversification across industries, but if you really are bullish on Apple and believe in its "moat," the ticker is "AAPL."

By Drew Voros, editor-in-chief, ETF.com