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HP's fall shows mutual fund confusion; NEW Vanguard responds

Is Hewlett Packard a growth stock or a value stock? Both, investment pros thought; but neither, after the boss was forced out

Is Hewlett Packard a growth stock or a value stock? Both, professional money managers said; but it's neither, at the moment, since the boss was forced out. The printer giant's stock fell 8% Monday after boss Mark Hurd left in the wake of a company investigation of a sexual harrassment complaint that found he'd violated "business conduct" rules.

So who lost money? As one of the nation's most valuable companies, HP is cemented into index mutual funds. It was also the third-largest holding in Vanguard US Growth fund - and the fifth-largest holding in Vanguard's Windsor II fund, which Morningstar Inc. calls a "value" fund, notes Daniel Wiener, publisher of the Independent Adviser for Vanguard Funds newsletter.

Growth! Value! What do they mean anymore? Wiener's a steady critic of Vanguard US Growth, which he says needs new direction. Meanwhile, he notes, "Vanguard director Rajiv Gupta [ex-head of the former Rohm and Haas] is also on the board of H-P. I'm sure he'll have tales to tell at the next Vanguard Board meeting."

UPDATE: "It's not unusual" these days for a big stock like HP to show up "in both the growth and value benchmark," as well as "growth" and "value" funds, says Vanguard spokeswoman Amy S. Chain. "Valuation spreads have compressed, thus creating overlap between 'growth' and 'value'." Earlier this year, for example, HP was part of both the Russell 1000 Growth and Russell 1000 Value indices, she added.

Separately, Chain called it "insulting and disrespectful" to suggest Rajiv Gupta PhD might ever discuss sensitive HP business (like the big-news Hurd firing) with the Vanguard board (Gupta serves on both): "Our board members take their role as stewards of our clients' assets very seriously, as they do their roles on the boards of other companies and institutions. They honor the confidentiality of those engagements and certainly do not waste time engaging in gossip."

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