It’s time for our annual ‘long or short’ NEXT? Next PLC can trace its roots back to 1864, when it was founded as Hepworth’s, a tailor’s shop, in Leeds. In 1982, Terence Conran the designer was Chairman of Hepworth’s when it took over Kendall and Sons, a rainwear and fashion company that was based in Leicester. From this, the Next brand of shops were born. The line was extended to cover men’s clothing, and in 1987 the group expanded by acquisition of the Grattan catalogue company and Combined English Stores.
The expansion did not proceed happily, and by 1988 the chief executive, George Davies, was fired and the share price fell to 7 pence. Despite a quality image, the company was struggling to survive. Over the years the company consolidated and now has 550 retail outlets in the UK, 180 shops abroad, and catalogue and web based sales.
As you can see from this chart in 2012 the company has grown significantly, even though it now appears to be in a period of range trading and consolidation. Next has expanded into a home and garden store at Shoreham-on-Sea and in Ipswich, and this new model appears to be working well for it. While the share price took a big hit in the global economic recession, dropping to 780, it has now recovered to well above previous highs of 2500.
The current pricing will not suit all traders. Those who like to trade with a strong trend will not find much on offer here. It depends on the strategies which you are developing and comfortable with. For instance, some strategies involve frequent trading, bouncing between solid support and resistance levels when a stock price is going sideways, and the price chart is suitable for such tactics. Once you have developed your spread betting strategy, then you will either find this chart to your liking or of no use. Be sure that you understand what sort of trader you are.
While the underlying retail business of Next is in decline; they have been honest and told everyone that for several quarters now and this is offset by their online sales growth and new stores so overall the business keeps improving.
Spread Betting Next Rolling Daily
Next Group PLC offer some opportunities for the spread better who wants to make small regular profits from a range trading stock. The current rolling daily price is 2986.0 – 2993.0. Suppose you think that the price is on the way down in its trading range, you could take a short or sell bet for £7 per point. The bet would be placed at the selling price of 2986.0.
If you are correct, and you see the price approach its support level of around 2900, you could close your bet and collect your profits when the quote is 2916.2 – 2923.2. Your starting price was 2986.0, and your bet closed at the buying price of 2923.2. That means you gained the difference which is 62.8 points. Multiplying by your stake of £7 per point, you have won £439.60.
Sometimes you will find that the price does not go in the direction that you anticipate, and then you need to close your bet and accept your loss before it becomes too large. Say in this case it went up to 3025.4 – 3032.4. When you choose to close your spread trade at this level, you can work out how much you lost. The bet closed at 3032.4, the buying price, and it opened at 2986.0. 3032.4 less 2986.0 is 46.4 points. At your chosen stake of £7 per point, you have lost £324.80.
It is often recommended that you set a stop loss order for every spread bet that you take out. Some people will argue against it, but it is a way to keep your losses down, particularly if you cannot be watching the market prices all the time. Say you had a stoploss on this bet, and it took you out of the trade when the price went up to 3018.0 – 3025.0. In this case the bet started at 2986.0, as before, but it closed out at 3025.0. That means you lost 39.0 points, and your losses would have been kept down to £273.
Next Futures Based Bet
You may feel that Next PLC is about to start a spurt of growth, and have identified technical indicators that support you in this view. If so, you may want to place a futures style bet, which will allow you to hold onto the position without charge for weeks or months while the growth unfolds. The current spread betting quotation for the far quarter futures style bet is 2999.9 – 3013.9. You decided to wager £12 per point.
If you are correct, in the fullness of time you may find that the price goes up to 3086.7 – 3099.6. Taking your winnings, you close the bet at the selling price of 3086.7. The bet was opened at the buying price of 3013.9, which means you have won 72.8 points. Multiplying by £12, that amounts to £873.60.
However, you cannot control the markets, and it may be that the price falls to a level where you feel you must close your trade and accept your loss before it becomes any greater. With a futures style bet, you can close the trade at any time and do not have to wait until the expiration date. If the price drops to 2953.1 – 2965.3, and you close your spread trade, you can work out how much you lost like this. The bet was opened at 3013.9 and closed at 2953.1. That means you lost 60.8 points. With a wager of £12 per point, this losing bet has cost you £729.60.
It sometimes works out better to place a stop loss order when you open your bet. This means you do not have to watch the market prices, as your spread betting company will close your losing bet when it reaches a certain level that you specify. Say your stop loss order closed the bet when the quote was 2968.2 – 2980.0. In this case you have lost 3013.9 minus 2968.2 points, which is 45.7 points. Multiplying by your stake once again, this would be a loss of £548.40.
Note: This share amazes me, I’ve been short (and burned) and traded it (reasonably well) but the fact is management seem to have it right. Difference between Next and Marks & Spencer – Marks & Spencer don’t have the same sort of online sales presence and are targeting different market sectors. Next has a big Directory presence, which accounts for about a third of sales. During the poor weather there are some shoppers who are more inclined to buy online than brave the high street.
In anycase Next PLC share price has trebled in the last 3 years! Maybe oversold then, however overbought now. Every day on the news and in general ,everyone is struggling with inflation. Unemployment is high and the lucky ones are suffering pay freezes. This share could make £30+ however I remember a certain chairman of RBS gloating how RBS was in a strong position and increased the dividend. That was 4 years ago when priced at £6. It fell to less than 10p within a year!