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Investment

Select stocks in charge of their own destiny: Aoris

In an uncertain environment, Aoris Investment Management is attempting to steer clear of volatility by avoiding businesses that exhibit significant ties to what it calls the 'no-go zone'.

Aoris aims to have up to 15 investments in its portfolio at any given time, with weightings of no more than 10% each. It also remains diverse in selection, avoiding investing in companies that exert "homogeneous" elements.

From those criteria, Aoris has laid out boundaries in avoiding investment in what the company calls 'no-go zones'.

"The businesses we're looking at are not random; there is scientific elements behind it," Aoris chief investment officer and managing director Stephen Arnold said at a roundtable yesterday.

"We don't own businesses where the external environment can matter... that would include businesses with a housing cycle, trade and tariffs, and politics.

"And we don't want to be in what I call the sharp end of change. Change is always exciting but it's always fluid and makes the future very uncertain - our businesses are in charge of their own destiny [without these factors]."

Additionally, Arnold added that some companies are using tariffs as a "smokescreen" to capitalise on extra fees.

He said: "I can [point the increase] towards tariffs... I put them [fees] up 5%, 6%, or 8% - will they [clients] really know the difference?"

By avoiding macro factors, companies can better focus on growth from other issues.

For example, Aoris has a position in the cosmetic giant L'Oreal and, despite its global popularity, the company struggled to grow its footprint in the China market.

"China's the second largest beauty market in the world after the US... it's been an important growth for L'Oreal; they've operated there for decades and grown a lot in that market," Aoris portfolio manager Delian Entchev said.

"Unnaturally, Chinese consumer spending slowed last year and there has been concerns about what that means for beauty spending."

Entchev's concern was valid as only approximately 100 million of the 500 million customers use L'Oreal product.

But to Entchev's surprise, L'Oreal views this as an opportunity to grow.

"What they [L'Oreal] told us is that they actually embrace competition," Entchev said.

"You want competition to be strong, which also prevents us from being complacent... everyone benefits from strong competition because the market aggregate is creating more offers, products and innovation to customers.

"It also amplifies the difference between companies that operate in a very centralised, rigid, and bureaucratic way; they take a long time to respond to changes in the external environment... good businesses find ways to remain relevant and evolve as customer needs change."

Read more: L'OrealAoris Investment ManagementDelian EntchevStephen Arnold