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Insider buying can often be a good indicator of a coming catalyst for a stock. When officers and directors purchase shares of their company in the open market, they are showing their commitment to the company and confidence in the share price. Of course, insiders suffer from the same emotions as other investors and no one should go out and buy a stock simply because of an insider purchase, but it is a great place to look for promising stocks to research.

I give more credit to CEO and CFO buys than to director buys. Management is in the trenches every day working and carrying out the will of the board. They have a better perspective on the short term negatives and positives in the company. Some of the CEOs and CFOs commit a large portion of their earnings to stock purchases as well. This is especially significant for microcap stocks since these officers typically aren’t paid as highly as in large companies. A $50,000 purchase is a significant event for a CFO making $300,000 per year.

Below are four microcaps with CFO purchases in the last week:

Pixelworks (NASDAQ:PXLW): Pixelworks is a video and pixel processing technology provider. This small $47 million company released earnings on January 27. Full year 2010 EPS was $0.03. CFO Steven Moore purchased $8,000 worth of company stock on January 31. He wasn’t alone. Four other officers made similar purchases on the same day, and all of them have proven to be very smart already. The stock has jumped 23% in the few days since the 31st. Moore has been an active purchaser over the last few years, picking up another 39,088 shares since February 2009. All of those purchases have been extremely profitable. He currently holds 55,291 shares.

Old Line Bancshares (NASDAQ:OLBK): Old Line Bancshares is a tiny $35 million bank that operates 10 branches in Maryland. Old Line had a $6.3 million private placement that closed on February 1 and all 13 directors made purchases. Additionally, the CEO, EVP, and CFO Christine Rush took part in the placement. Rush bought $34,650 worth. She currently owns 11,068 shares. In all, this group bought 171,008 of the shares totaling $1.4 million.

This is a strong vote of confidence for the bank. What I wouldn’t be happy about if I was a shareholder, though, was seeing on their most recent 8-K that significant cash bonuses and options were paid to the CEO, CFO and EVP. Not only that, but they continue to pay a dividend. I'd be interested in learning why they decided to do the placement, but not address those last two issues.

Community Partners Bancorp (CPBC): Community Partners Bancorp is another small bank with 15 branches operating in New Jersey. This stock is very thinly traded and has a market cap of $40 million. They reported good earnings on January 24 and the stock has risen sharply since then. CFO Richard Abrahamian is taking advantage of the uptick and purchased $5,000 worth on January 28 at $5 per share. He owns 5,162 shares in total.

Sharps Compliance (NASDAQ:SMED): Sharps is a $62 million medical waste disposal provider. CFO Diana Diaz purchased $9,800 worth of shares on January 28. This was her first purchase of company shares, which is potentially significant. CEO David Tusa made a purchase the same day as Diaz, along with some other directors and officers. For a discussion on his trades, please visit an article I wrote yesterday on CEO insider purchases.

Source: Insider Buying: Four Microcaps With CFO Buys in the Last Week