David Fassnacht, the new manager of the $21 billion Vanguard Windsor Fund, is looking in unlikely spots for undervalued stocks to improve...

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David Fassnacht, the new manager of the $21 billion Vanguard Windsor Fund, is looking in unlikely spots for undervalued stocks to improve his performance.

Fassnacht is buying shares of computer-related companies such as Cisco Systems and drug makers including GlaxoSmithKline, two industries better known for having above-average earnings growth than cheap stocks.

Windsor, under the management of John Neff and later Charles Freeman, was known for buying stocks considered cheap relative to profits and other financial yardsticks. Neff was involved in managing the Windsor fund for more than 30 years — until 1995 — and helped establish, along with Freeman, one of the best long-term investment records in the $7.9 trillion mutual-fund industry.

“We’re there to buy the best, most attractively valued stocks, regardless of where they might be,” Fassnacht said in an interview from his office in Radnor, Pa.

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There are “more opportunities in names that historically have fallen under the growth banner,” he said.

Windsor, which has focused on so-called value stocks throughout its 46-year history, has risen 13 percent during the past 12 months, through June 17, placing 17th of 44 U.S. stock mutual funds with more than $10 billion of assets, data compiled by Bloomberg show.

The top-performing fund in the group was the $11.4 billion Fidelity Value Fund, up 21 percent.

Fassnacht has purchased shares of Applied Materials, the largest producer of equipment that’s used to make computer chips, as well as Cisco, the world’s No. 1 maker of computer-networking equipment. His holdings also include two of Europe’s largest drug companies, GlaxoSmithKline and Sanofi-Aventis.

Shares of so-called growth companies, those expected to record the biggest earnings gains, are cheaper than they were when equity markets peaked in 2000. The average stock in the Russell 1000 Growth Index trades at 24 times earnings, compared with 51 times in 2000, Bloomberg data show.

“We’re hearing from a lot of value-oriented managers that they’re taking this opportunity to move into stocks with growth prospects,” said Christine Benz, an analyst at Morningstar, an industry research firm in Chicago. “My goodness, Cisco is in the portfolio right now, which isn’t something that Windsor shareholders might be expecting.”

Fassnacht said he bought shares of Glaxo and Sanofi-Aventis when they were selling at 11 to 13 times earnings and the market average was 16. Other investors may have overlooked or been too impatient to wait for early-stage drug development that could lift the stocks within 18 months, he said.

“Our view was we were getting stocks really cheap at great yields and getting paid to wait,” Fassnacht said.

Windsor has outpaced about two-thirds of the funds with similar investment objectives during the past five years, as it rose at an annual pace of 8.6 percent, according to Bloomberg data.

“This isn’t a fund you want to judge by short-term time periods,” Benz said. “It will be streaky, and management will be early into some of these unloved stocks.”