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“The FTSE 100 holds firm at 7,664 as the new trading week gets underway. A robust performance from utility companies and engineers is offset by weakness in miners and insurers,” says Russ Mould, investment director at AJ Bell.
Indivior
“A large number of companies spend a disproportionate amount of time fighting to protect their intellectual property, particularly tech and drug companies.
“It is understandable that creative and innovative businesses are willing to go to great measures to stop copycats from capitalising on their ideas. However, it is also a major distraction for management whose talents probably lie more in the ability to sell products and services and create new intellectual property.
“Indivior’s high profile battle against Dr Reddy’s Laboratories is a perfect example of how a business can be distracted by legal events. Its share price has recently been like a yo-yo, moving down and up on regular occasions as the market reacts to the latest news regarding its fight against generic versions of its opioid addiction treatment.
“Today’s share price surge gives hope to many investors that Indivior has the stronger muscles in its arm wrestling match with Dr Reddy’s. However, the battle has not concluded until the court has made a final decision regarding the patent litigation.
“Even if the decision swings in Indivior’s favour, it is unlikely to be the last time it goes to court regarding patents, such is the nature of its industry.”
Infrastructure sector/John Laing Infrastructure Fund
“The infrastructure space has been popular with investors as an alternative asset class offering a long-term and, in theory, predictable source of income.
“Political threats, failed IPOs and an increasingly competitive market have recently the sheen off infrastructure funds and seen them fall out of favour.
“The risk that a potential Labour government might crack down on private involvement in big public projects, particularly after the failure of outsourcer Carillion earlier this year, is perhaps the biggest negative factor.
“However, the revelation of takeover interest for John Laing Infrastructure Fund is helping to revive some interest in the sector, with counterparts International Public Partnerships and HICL Infrastructure also in demand on the stock market.
“Nonetheless, some evidence of the reduced standing of infrastructure as an asset class is provided by the relatively skinny premium to net asset value of less than 20% implied by the offer. Most investors tend to demand at least 20% bid premium in order to accept a takeover.”
Debenhams
“Reports that suppliers to Debenhams are seeing tightened terms from credit insurers have eerie echoes of previous retail failures like Woolworths and HMV, which both experienced similar issues ahead of their respective collapses.
“Suppliers need this insurance as it protects them against the risk of a customer going out of business in the time between an order being made and payment being received. Without it they might demand upfront payment, resulting in onerous cash demands for the customer in question.”
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