Corporate Insiders Shift From Buy to Sell as Bankruptcy Nears - WSJ.com

We preach following insiders.  It’s no wonder why. What’s amazing is that many people including very smart people think they have a better idea of what’s going on than the very people inside running the business.

By SUSAN PULLIAMand ROB BARRYCONNECT

One day in September 2011, Wall Street analysts trundled into the spacious lobby at the Livonia, Mich., plant of a company called A123 Systems Inc. to view a slide presentation describing a rosy outlook for the maker of lithium batteries. View Graphics”They stood up in front of investors and painted a very bullish picture,” said Andrea James, an analyst at Dougherty & Co., who took pictures of the lobbys two-story floor-to-ceiling window. “It looked like the lobby of a company that was making money hand over fist.” Thirteen months later, it filed for bankruptcy protection. But not before insiders unloaded a total of $2.5 million of its stock. The company said the sales conformed to its policy for insider transactions.The episode suggests how corporate insiders trading can shift in the months before their companies file for bankruptcy. A Wall Street Journal review of thousands of trades by insiders in their own companys stock found the trades veering heavily toward selling rather than buying as bankruptcy filings d

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