THE investment company controlled by financier Mr Dermot Desmond, International Investment & Underwriting, has increased its stake in the engineering group Unidare to almost 10 per cent after buying 300,000 shares in the market.

The purchase of the additional 300,000 shares brings the total IIU holding to 1.94 million shares and came ahead of last week's warning from the Unidare board that its profits would be down on market expectations.

This is the second time in the spare of six months that IIU buying of Unidare shares has coincided with a Unidare profits warning In March, IIU bought 500,000 shares at 220p and 225p the day after Unidare issued its first profits warning of the year.

In July, IIU bought a further 500,000 Unidare shares at 180p and 200p. The price at which the latest 500,000 shares were acquired has not been disclosed by IIU, but the only dealing of any significant size in Unidare shares last week was at 180p - just before the latest profits warning was made.

IIU's eagerness to invest in a poorly performing company like Unidare has confused the market. Since IIU began investing in the engineering company last year the Unidare share price has moved steadily downwards from 300p to its current 170-190p in the market - on a steady diet of poor results and profit warnings.

Other institutions believe that IIU has a deliberate policy of investing in poorly performing stocks, with the aim of buying in at a low price ahead of a later recovery. Unidare, however, shows few signs of a recovery and there is little confidence among investors - many of whom paid 515p per share in a rights issue a few years ago - in an early restoration of the group's fortunes.

Over the past year, IIU has acquired a 3.3 per cent stake in Jones and a 3.5 per cent in Barlo. IIU has also acquired a 6.5 per cent stake in Golden Vale, the food company which has gone through a traumatic year with the sacking of its chief executive, EU superlevy fines and a downturn in the dairy products industry.