When a top-level insider makes a large purchase in their own company, investors should take note. It’s not a stretch to say that these individuals are some of the most informed participants in the market.
In this report, we are going to highlight a large insider purchase at Next PLC (NXT:LN). Next is a UK-based clothing retailer that operates in the UK, Europe, Asia, and the Middle East. The group has around 700 stores in total, and also sells its products online. The company is listed on the London Stock Exchange and currently has a market capitalization of £10.5 billion.
Next: Insider Buying
Our insider transaction data shows that on 30 July, Chairman Michael Roney bought 3,500 shares at an average price of £78.47 per share. This purchase – which cost the insider just under £275,000 – increased his holding to 44,321 shares.
This buying activity is worth highlighting for several reasons. Firstly, Roney has made a large purchase. Our data shows that this insider purchase is the largest at Next for several years. This suggests that the insider is confident the stock is set to move higher.
Secondly, Roney has made some well-timed purchases in the recent past. Last March, for example, the insider picked up 2,546 NXT shares when the stock was trading at £39. Since then, it has risen to £78.
On 21 July, Next posted a very encouraging trading statement. In this update, the group advised that sales for the 11 weeks to 17 July were “materially ahead” of expectations, with full-price sales up 18.6% versus two years ago. Its previous guidance assumed an increase of 3%. It also advised that online sales were up 44% on the same period in 2019.
As a result of the strong increase in sales, the group raised its guidance for the full year. It now expects full-price sales growth of 6% for the year, versus previous guidance of 3%, and full-year profit of £750 million, versus previous guidance of £720 million.
Since this trading update, a number of brokers have raised their target prices for the stock. Credit Suisse has raised its target price to 8,025p from 7,150p, while HSBC has raised its target price to 9,400p from 9,000p.
In light of these developments, we see the insider buying here as a bullish indicator.