Google vs. Apple -- which is the better stock?

NEW YORK (CNNMoney.com) -- It's Apple's and Google's mobile world. We're all just living in it.

For many, the iPhone joins food, clothing and shelter as an essential human need. Now, the hype is building for an Apple tablet, a device widely expected to be rolled out in March and already being declared the next big thing in tech.

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Apple (AAPL, Fortune 500) isn't content to just make money from selling devices that let you tweet and change your Facebook status on the go either. It also is angling for a cut of the potentially lucrative market for advertising tied to mobile applications. Apple announced Tuesday that it was buying mobile ad firm Quattro Wireless.

Not to be outdone, Google (GOOG, Fortune 500) on Tuesday unveiled its own smartphone, the Nexus One, to mostly positive reviews. The search engine giant also announced the acquisition of AdMob, another mobile ad provider, in November for $750 million.

So it's clear that Google and Apple are gearing up for battle in both the mobile gadget and ad markets.

In fact, Google chairman and CEO Eric Schmidt stepped down from Apple's board last year while Arthur Levinson, the former CEO of biotech Genentech who had been a director at both Google and Apple, resigned from the Google board in 2009.

"Google and Apple are going from a friendly rivalry to a bit more of an intense rivalry. Each company is stepping more into each other's key business," said Sunil Reddy, portfolio manager with Apex Capital Management, a Dayton, Ohio-based money manager that owns both stocks.

But so far, investors think both companies are winners.

Shares of Apple hit an all-time closing high of $214.38 on Tuesday and the stock has more than doubled in the past year. Google, meanwhile, closed at about $624 a share Tuesday, its highest level since January 2008 and only around 15% below its all-time high.

So should investors keep riding both of these hot hands? Is it time to choose one over the other? Or are both of them now overvalued and due for a pullback?

John Snyder, manager of the John Hancock Sovereign Investors fund, said he'd be buying Google over Apple.

Mind you, his fund holds both stocks and he said he's in no hurry to sell his Apple position anytime soon. But he noted that Google is a better value right now -- its stock trades at about 23 times 2010 earnings estimates compared to a P/E of 27 times fiscal 2010 earnings estimates for Apple.

Snyder conceded that neither stock is a screaming bargain. Still, he thinks that the expectations are so lofty for Apple that it's possible the company could hit a slight hiccup and not live up to Wall Street's targets.

"Apple is such a momentum stock at this point. Obviously, everything is going well for it, but everybody knows that. And at some point, comparisons could become a lot more challenging," he said.

But Reddy said investing in Google and Apple should not be thought of as an either/or scenario. He said that both Google and Apple will probably continue to steal market share from competitors.

So instead of Google and Apple hurting each other, their success could spell trouble for the likes of Microsoft (MSFT, Fortune 500), Nokia (NOK) and Yahoo! (YHOO, Fortune 500), for example.

"I find it hard to see the momentum shifting in the next couple of quarters for either stock. They are both gaining market share," Reddy said. "The unique thing with both companies is how loyal the users are to their products and there's a lot of value in that."

That makes sense. The mobile business is still in its nascent stages. Google and Apple are likely to both benefit from growth in the market for some time before they reach a point where they are truly butting heads.

"It will be a long time before Google makes much of an impact in the device market as it will be a long time before various efforts from Apple will make a dent in search and advertising," said Ken Allen, manager of the T. Rowe Price Science & Technology fund, which also owns both stocks.

Of course, investors have to be realistic if they are looking to buy Google or Apple -- or both -- now.

Allen said one of the main reasons that the two stocks both doubled last year was because sentiment shifted so dramatically. It went from the doom and gloom of the first quarter to the euphoria later in the year, as investors realized that the economy was not going to completely collapse.

With fears of financial Armageddon fading, it's harder to argue that either Google's or Apple's stocks are undervalued -- no matter how strong the economy gets or how healthy their earnings are.

"Neither stock is positioned to have a year like they had last year," Allen said.

Reddy agreed. He said both stocks are good bets for the long term, but investors shouldn't buy them if they are expecting another huge pop over the next year.

"Both companies have a lot of cash and it's hard not to like them. But they are reasonably valued, not cheap," he said. "If you are a new investor in these companies, you have to be careful about when you buy. There is no need to rush in and no need to rush to get out."