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Why does insider buying matter for small companies? Because small companies often have no analysts following them. This means choosing the right micro-cap (market cap < $300 million) can be very profitable. In fact, the Russell 2000 index has outperformed the S&P 500 significantly over the past 10 years, returning 66% and 25%, respectively.

Choosing the right small companies to invest in can be daunting: Where should you start? Insiders, especially executives and directors of small companies, tend to know their companies very well. Tracking their stock purchase activities is a very good point to start for lucrative returns.

Below is a list of notable insider purchases of micro-cap stocks (market cap <$300 million) filed with the Securities and Exchange Commission during the past week. Following Seeking Alpha's micro-cap policy, all the stocks are trading at more than $1 per share or have a $100 million market cap.

I have written a short analysis of each company's financial records. However, these are not buy and sell recommendations. It is also important to pay attention to how much the insiders buy, especially with respect to the size of their company and their regular income. As Peter Lynch pointed out in his book, One Up On Wall Street, insiders sell for various reasons, which is usually not very informative unless they are dumping shares like there's no tomorrow. Insiders buy for one reason: They are signaling that they have confidence in the company's future performance. Of course, insiders could be wrong. It is nevertheless a good starting point to add those stocks to your watch list.

On this week's list, the most positive companies based on the financial records are DBN Financial, Jacksonville Bancorp, Mercantile Bank, and Synergy Resources.

Agilysys (AGYS) is a technology company, specifically in the industry of application software. It has a market cap of $191.24 million. Over the past week, Agilysys had one insider who purchased a total of 500 shares. Given that its price is only 12.50% off its 52-week high, the overall market sentiment appears positive. One concern is the company isn't profitable at this point. The trading volume has been consolidating recently. To summarize, there aren't enough positive factors to buy this company based on insider purchase alone.

Air T (AIRT) is a services company, specifically in the industry of air delivery and freight services. It has a market cap of $23.65 million. Over the past week, Air T had one insider who purchased a total of 500 shares. Given that its price is only 2.22% off its 52-week high, the overall market sentiment appears positive. Low recent trading volume can be negative or positive. It can be negative because it will be difficult for people to discover this micro-cap. It can be positive because ignored stocks tend to be undervalued. In conclusion, I may put it on my watch list, but it's definitely not on top of the list.

American Spectrum Realty (AQQ) is a financial company, specifically in the industry of property management. It has a market cap of $16.98 million. Over the past week, American Spectrum Realty had one insider who purchased a total of 21,4340 shares. Given that its price is only 2.22% off its 52-week high, the overall market sentiment appears positive. Its price is only around 16.85% off its 52-week low. While the stock appears to have bottomed, investors should proceed with caution. In conclusion, I don't think the company's overall financial record is very solid.

Bridge Bancorp (BDGE) is a financial company, specifically in the industry of regional Northeast banks. It has a market-cap of $162.84 million. Over the past week, Bridge Bancorp had one insider who purchased a total of 1,000 shares. Given that its price is only 12.00% off its 52-week high, the overall market sentiment appears positive. I like Bridge Bancorp's operating margin of 36.38%, a good sign for the company's financial health. The verdict: I may put it on my watch list, but its definitely not on top of the list.

DBN Financial (DNBF) is a financial company, specifically in the industry of regional Pacific banks. It has a market cap of $37.69 million. Over the past week, DBN Financial had five insiders who purchased a total of 1,930 shares. Multiple insider purchase occasions are usually a positive sign. Given that its price is only 2.32% off its 52-week high, the overall market sentiment appears positive. I like DBN Financial's operating margin of 31.78%, a good sign for the company's financial health. The trading volume has been consolidating recently. My conclusion: I would put this company on my watch list.

Hallmark Financial Services (HALL) is a financial company, specifically in the industry of property and casualty insurance. It has a market cap of $140.43 million. Over the past week, Hallmark Financial Services had five insiders who purchased a total of 1,930 shares. Given that its price is only 13.79% off its 52-week high, the overall market sentiment appears positive. One concern is that the company isn't profitable at this point. Despite the insider purchase, I'm not very positive about the company's prospect.

Jacksonville Bancorp (JXSB) is a financial company, specifically in the industry of savings and loans. It has a market cap of $29.55 million. Over the past week, Jacksonville Bancorp had five insiders who purchased a total of 1,930 shares. Given that its price is only 2.93% off its 52-week high, the overall market sentiment appears positive. I like Jacksonville Bancorp's operating margin of 33.66%, a good sign for the company's financial health. My thoughts: The company appears attractive.

Keryx Biopharmaceuticals (KERX) is a healthcare company, specifically in the industry of major drug manufacturers. It has a market cap of $124.29 million. Over the past week, Keryx Biopharmaceuticals had one insider who purchased a total of 19,100 shares. One concern is the company isn't profitable at this point. I would not buy the stock at this point.

Kingstone (KINS) is a financial company, specifically in the industry of property and casualty insurance. It has a market cap of $13.79 million. Over the past week, Kingstone had one insider who purchased a total of 2,000 shares. Given that its price is only 11.86% off its 52-week high, the overall market sentiment appears positive. This company appears to be a risky play.

Lynch Corp. (LGL) is a technology company, specifically in the industry of scientific and technical instruments. It has a market cap of $19.13 million. Over the past week, Lynch had one insider who purchased a total of 200 shares. Given that its price is only 11.86% off its 52-week high, the overall market sentiment appears positive. Its price is only around 19.71% off its 52-week low. While the stock appears it might have bottomed, investors should proceed with caution. I see more negatives than positives in this company.

Mercantile Bank (MBWM) is a financial company, specifically in the industry of regional Midwest banks. It has a market cap of $129.12 million. Over the past week, Mercantile Bank had one insider who purchased a total of 200 shares. Given that its price is only 1.64% off its 52-week high, the overall market sentiment appears positive. I like Mercantile Bank's operating margin of 41.52%, a good sign for the company's financial health. My conclusion: I would put this company on my watch list.

Magyar Bancorp (MGYR) is a financial company, specifically in the industry of regional Northeast banks. It has a market cap of $26.59 million. Over the past week, Magyar Bancorp had one insider who purchased a total of 500 shares. Recently, the stock has traded fairly inactively. The verdict: There aren't enough positive factors to buy this company based on insider purchase alone.

Northern Technologies International (NTIC) is a consumer goods company, specifically in the industry of packaging and containers. It has a market cap of $57.92 million. Over the past week, Northern Technologies had one insider who purchased a total of 3,000 shares. I like this company with an very undervalued stock reflected in a low PEG ratio. One concern is the company isn't profitable at this point. This company appears to be a risky play.

Pacific Continental (PCBK) is a financial company, specifically in the industry of regional Pacific banks. It has a market cap of $164.30 million. Over the past week, Pacific Continental had one insider who purchased a total of 200 shares. Given that its price is only 10.47% off its 52-week high, the overall market sentiment appears positive. I like Pacific Continental's operating margin of 28.73%, a good sign for the company's financial health. The trading volume has been consolidating recently. I'd avoid this company at this price level.

Rait Investment Trust (RAS) is a financial company, specifically in the industry of diversified REITs. It has a market cap of $210.10 million. Over the past week, Rait Investment Trust had one insider who purchased a total of 200 shares. The recent trading volume is below average. I don't think the company's overall financial record is very solid.

Schmitt Industries (SMIT) is a technology company, specifically in the industry of scientific and technical instruments. It has a market cap of $9.75 million. Over the past week, Schmitt Industries had one insider who purchased a total of 5,000 shares. Given that its price is only 19.31% off its 52-week high, the overall market sentiment appears positive. To summarize: I would not buy the stock at this point.

Stanley Furniture (STLY) is a consumer goods company, specifically in the industry of home furnishings and fixtures. It has a market cap of $65.29 million. Over the past week, Stanley Furniture had one insider who purchased a total of 565 shares. Given that its price is only 19.42% off its 52-week high, the overall market sentiment appears positive. One concern is the company isn't profitable at this point. Recently, the stock has traded fairly inactively. This company appears to be a risky play.

Severn Bancorp (SVBI) is a financial company, specifically in the industry of regional mid-Atlantic banks. It has a market cap of $36.64 million. Over the past week, Severn Bancorp had one insider who purchased a total of 565 shares. I like Severn Bancorp's operating margin of 37.35%, a good sign for the company's financial health. In conclusion, I would watch this stock with caution.

Synergy Resources (SYRG) is a basic materials company, specifically in the industry of oil and gas equipment and services. It has a market cap of $162.14 million. Over the past week, Synergy Resources had one insider who purchased a total of 565 shares. I like this company with an very undervalued stock reflected in a low PEG ratio. Synergy Resources has a very healthy operating margin of 38.42%. This is a relatively safe play.

Food Technology Service (VIFL) is a services company, specifically in the industry of business services. It has a market cap of $18.51 million. Over the past week, Food Technology Service had one insider who purchased a total of 11,148 shares. Given that its price is only 16.65% off its 52-week high, the overall market sentiment appears positive. I like Food Technology Service's operating margin of 38.16%, a good sign for the company's financial health. Recently, the stock has traded fairly inactively. I'd avoid this company at this price level.

Winmark (WINA) is a services company, specifically in the industry of specialty retail. It has a market cap of $263.60 million. Over the past week, Winmark had one insider who purchased a total of 10,000 shares. I like Winmark's operating margin of 48.94%, a good sign for the company's financial health. In conclusion, the company has a decent dividend payout that provides a minimum margin of safety. A lot of caution should be used while watching new progress in this name.

Source: Notable Micro-Cap Stock Insider Buys This Week