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Stocks in this article: LIT VOX PZD JCI VZ

NEW YORK ( TheStreet) -- Microsoft (MSFT) reported earnings after the close on Thursday, and by now it is well known that the company missed earnings per share estimates, was light on revenue, hasn't quite gotten it right with the Windows 8 operating system and has to deal with what appears to be a deteriorating PC market.

The market reaction on Friday was to take the stock down 11%, which is a huge move relative to the company's recent history.

Microsoft is still mega-cap company, the third largest in the S&P 500, and so it has a large presence in just about every technology-focused ETF.

Before the earnings report, it had an 8.5% weighting in the PowerShares QQQ (QQQ), although that weighting has fallen to 7.6%. It has an even larger weighting in the iShares US Technology ETF (IYW).

It is very common in sector ETFs, country ETFs and other specialized funds to have very large positions in one or two stocks. For example, the Vanguard Telecom Services ETF (VOX) allocates a combined 45% to AT&T (T) and Verizon (VZ), and the Global X Lithium ETF (LIT) has 23% in FMC (FMC).

Sticking with the example of the Lithium ETF, the story behind the fund is simple to understand. Lithium is used in batteries for electric cars. If electric cars ever truly proliferate and battery technology doesn't evolve away from using lithium, then it stands to reason that the companies underlying LIT would do very well.

When LIT first debuted, the largest holding was Chilean miner Quimica Y Minera (SQM), at what was 20% of the fund. In the last two years, however, SQM has declined by 40%, its weight in LIT now is only 10% and its decline has contributed to LIT's 40% decline.

SQM has been held back by weak performance in general for materials companies, and Chile's equity market has been in a down trend more often than not for the last two years. It is also possible the slower growth in electric car sales has hurt the company, but lithium actually only accounts for a small portion of SQM's revenue.

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