Personal scandals and misdoings aren't limited to the world of politics. This time around, the CEO of Hewlett-Packard (NYSE: HPQ) is taking his turn in the shame spotlight. Head honcho Mark Hurd recently announced his resignation amid allegations of submitting inaccurate expense reports and sexual harassment claims by a female contractor at the company. Upon news of Hurd's resignation, HP's stock dropped about 10% and has remained roughly at that level ever since.

While investors who owned shares of HP may have taken a financial hit as a result of recent events, that doesn't mean they are the only ones who got knocked. Mutual fund investors who owned funds with outsized exposure to HP may also be feeling the heat. According to data from Lipper, three Fidelity funds currently rank as the largest owners of HP shares. Here's what HP's troubles could mean for owners of these funds and what investors can do in response.

The downside of focused investing
Fidelity Select Computers (FDCPX) was reported to have a heavy 11.9% allocation to Hewlett-Packard, making it the fund's second largest position. The fund has dropped about 2.4% in the past week, no doubt hampered by its meaningful exposure to the stock.

This helps to demonstrate why I'm not a fan of narrowly focused, sector- and industry-specific funds. These types of funds aren't diversified and people tend to use them to chase returns and take a gamble on making a quick buck. As an example, this fund's largest allocation is to Apple (Nasdaq: AAPL), which accounts for a whopping 17.7% of assets. Now I think Apple clearly has a lot going for it, including meaningful growth opportunities both domestically and overseas, and market share that's hard to beat. But if the stock suffers a setback, this fund is likely to take a big hit.

As tech spending rebounds, I think good things are in store for the technology sector, especially for low-P/E market leaders like IBM (NYSE: IBM), which is this fund's third largest holding. But investing in a fund that focuses exclusively on the hardware and computer market is a bit too focused of a play. Not to mention that Fidelity Select Computers has a new manager on board as of this April, so its past track record doesn't mean much. I think investors could do better with a more diversified fund that has a meaningful allocation to the tech sector. This fund really isn't a necessity for most investors, so folks should think twice before dedicating money here.

Closed-door investing
Clocking in with an 8.6% weighting to Hewlett-Packard is Fidelity Congress Street (CNGRX), a low-turnover large value fund with roughly $44 million in assets. This fund hasn't been quite as affected by HP's movements, falling just 0.3% in the past week. Although the fund has a decent allocation to HP, the fact that it is more diversified and invests across the domestic market means there's not as much risk here. Although the fund has a decent tech allocation, more defensive consumer names like Coca-Cola (NYSE: KO) and Philip Morris International (NYSE: PM) also play a big role in the portfolio. Since these stocks currently boast a dividend yield of 3.1% and 4.4% respectively, they should provide a nice, stable income boost to complement some of the more growth-oriented tech positions in the fund.

Although the fund's long-term track record is pretty decent, a new manager took over here in September 2007. She has done well in that time, but longer-term results would be a better indication of manager skill. At any rate, this fund appears to be closed to new investment of any kind, so allocating new money here isn't really a concern. Existing shareholders can probably sit tight here, but other investors can safely look to any number of other large-value funds for their needs.

Staying the course
Lastly, Fidelity Exchange Fund (FDLEX) is pretty much in the same boat as the Congress Street Fund. Both funds are run by the same manager and both are closed to all new investment. Hewlett-Packard is Exchange Fund's top holding, with an 8.2% allocation. The fund has dropped just 0.2% in the past week, protected by its well-diversified portfolio. Like Congress Street, reasonably priced, high-yielding consumer names are in favor right now, including Procter & Gamble (NYSE: PG) and McDonald's (NYSE: MCD). Both of these companies meet management's selection criteria for stocks with decent prospects for capital appreciation that also provide current income. Again, current shareholders can stay invested comfortably here and shouldn't worry about HP negatively affecting the fund to any great degree.

Ultimately, it pays for mutual fund investors to be aware of how their funds are invested, especially in the case of more concentrated funds. By staying diversified, you can avoid much of the worries associated with blow-ups at any single company.

In the end, I think much of the hype over the goings-on at Hewlett-Packard is overblown. Despite the turmoil at the top of the firm's management structure, the company still boasts a growing business line, healthy profits and market share, and decent return on equity for shareholders. If you thought HP was a good company before last week, then it's still a good company today and even more of a bargain, thanks to its recent tumble. If you're in the business of buying solid companies when temporary circumstances make them more affordable than usual, it might pay to take a second look at Hewlett-Packard.