Fund Manager Picks Spark Plugs and Copiers

What do spark plugs and high-end copiers have in common?  Ned Gray. 

Gray's four-star Delaware Global Value Fund has generated an annualized return of more than 20 percent over the last five years, and the companies he likes include a spark-plug maker and a copier company.

He's found that both companies use their capital efficiently, generate excess returns, and return their excess cash to shareholders.

NGK Spark Plug is the world leader in spark-plug manufacturing, but they're not just the market leader.

"They've got a good advantage through higher-quality products, lined up to benefit from the shift toward higher fuel efficiency in cars," Gray told CNBC.  "They also have a dramatically-expanding range of automotive sensors, which we think are also likely to benefit from that shift."

The recent history of Xerox has not been inspiring to many investors, but Gray thinks the company deserves a closer look.

"They've really ceded a substantial portion of their broader mass-market copiers to their Japanese competitors, especially Ricoh and Canon," he observed.  "What they've done in the meantime is refocus their technology, concentrating on what is now one of the fastest-growing segments of the copier production market, which is the high-end color segment, where they still do have a competitive advantage."

Gray's firm owns NGK Spark Plug.