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Why do insider purchaseד 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 outperformed the S&P 500 significantly over the past ten years: Russell 2000 index returned 66% vs. S&P 500 25%.

Choosing the right small companies to invest can be daunting: where should you start? Insiders, especially executives and directors of small companies, tend to know their company 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) during the past week, filed at the Securities and Exchange Commission. Following Seeking Alpha's micro-cap policy, all the stocks in the table are greater than $1 per share or $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. I have filtered out those transactions with a total value of less than $10,000. 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 is 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 (5/14-5/18/2012), the most positive companies based on the financial records are Bank Of South Carolina and First Savings Financial Group.

A. H. Belo Corp (NYSE:AHC) is a services company, specifically in the industry of publishing newspapers. It has a market cap of $92.39 million. Over the past week, A. H. Belo has one insider who purchased a total of 40,000 shares at the total value of $169,084 . A. H. Belo's price is near the bottom, at around 10.73% off its 52-week low. My conclusion: This company appears a risky play.

Air T Inc (NASDAQ:AIRT) is a services company, specifically in the industry of air delivery & freight services. It has a market cap of $22.89 million. Over the past week, Air T has one insider who purchased a total of 1,300 shares at the total value of $12,413 . Given that its price is only 5.36% 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: This is likely a stock very low on my watch list.

Analysts International Corp (NASDAQ:ANLY) is a technology company, specifically in the industry of information technology services. It has a market cap of $19.53 million. Over the past week, Analysts International has one insider who purchased a total of 6,500 shares at the total value of $24,850. My thoughts: I see more negatives than positives in this company.

American Reprographics Co (NYSE:ARC) is a technology company, specifically in the industry of application software. It has a market cap of $245.94 million. Over the past week, American Reprographics Co has one insider who purchased a total of 10,851 shares at the total value of $55,133 . My thoughts: I would not buy the stock at this point.

Aware Inc (NASDAQ:AWRE) is a technology company, specifically in the industry of communication equipment. It has a market cap of $116.00 million. Over the past week, Aware has one insider who purchased a total of 3,700 shares at the total value of $19,980 . The verdict: The company has a decent dividend payout that provides a minimum margin of safety. Despite insider purchase, I'm not very positive about the company's prospects.

Bank Of South Carolina Corp (NASDAQ:BKSC) is a financial company, specifically in the industry of regional - mid-Atlantic banks. It has a market cap of $50.66 million. Over the past week, Bank Of South Carolina has 4 insiders who purchased a total of 6,120 shares at the total value of $69,896 . Multiple insider purchase occasions are usually a positive sign. Its stock price is about 3.39% off its 52-week high, usually a positive technical indicator on the company. Bank Of South Carolina Corp has a very healthy operating margin of 37.61%. Thinning trading volume suggests that trading interest in the company is waning. In conclusion: This is a relatively safe play.

Bsb Bancorp Inc. (NASDAQ:BLMT) is a financial company, specifically in the industry of money center banks. It has a market cap of $116.30 million. Over the past week, Bsb Bancorp. has one insider who purchased a total of 3,933 shares at the total value of $50,342 . Its stock price is about 5.16% off its 52-week high, usually a positive technical indicator on the company. The recent trading volume is below average. The verdict: I do not see enough evidence for establishing a position.

Bank Of Commerce Holdings (NASDAQ:BOCH) is a financial company, specifically in the industry of regional - Pacific banks. It has a market cap of $67.34 million. Over the past week, Bank Of Commerce Holdings has one insider who purchased a total of 5,000 shares at the total value of $20,400 . Its stock price is about 11.69% off its 52-week high, usually a positive technical indicator on the company. I like Bank Of Commerce Holdings's operating margin of 28.98%, a good sign for the company's financial health. 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. My thoughts: I would watch this stock with caution.

Bacterin International Holdings Inc. (NYSEMKT:BONE) is a healthcare company, specifically in the industry of biotechnology. It has a market cap of $67.46 million. Over the past week, Bacterin International Holdings. has one insider who purchased a total of 26,500 shares at the total value of $42,154 . Its price is only around 19.55% off its 52-week low. While the stock appears it might have bottomed, investors should proceed with caution. The company is current losing money operationally. Its business has to turnaround for the situation to become more positive. The trading volume has been consolidating recently. In conclusion: I don't think the company's overall financial record to be very solid.

China Biologic Products Inc. (NASDAQ:CBPO) is a healthcare company, specifically in the industry of biotechnology. It has a market cap of $207.37 million. Over the past week, China Biologic Products has one insider who purchased a total of 7,000 shares at the total value of $66,500. I like China Biologic Products' operating margin of 36.95%, a good sign for the company's financial health. Recently, the stock is traded fairly inactively. To summarize: A lot of caution should be used while watching new progress.

Clearone Communications Inc (NASDAQ:CLRO) is a technology company, specifically in the industry of communication equipment. It has a market cap of $34.03 million. Over the past week, Clearone Communications has one insider who purchased a total of 31,943 shares at the total value of $129,993 . Clearone Communications' price is near the bottom, at around 0.81% off its 52-week low. My thoughts: A lot of caution should be used while watching new progress.

Cenveo Inc (NYSE:CVO) is a services company, specifically in the industry of business services. It has a market cap of $109.73 million. Over the past week, Cenveo has 8 insiders who purchased a total of 175,000 shares at the total value of $348,815. Multiple insider purchase occasions are usually a positive sign. Its price is only around 4.22% off its 52-week low. While the stock appears it might have bottomed. Investors should proceed with caution. Based on its PEG ratio of 0.57, the stock appears undervalued. To summarize: This stock is OK for your watch list, but not particularly appealing based on its overall financial records.

Covenant Transport Inc (NASDAQ:CVTI) is a services company, specifically in the industry of trucking. It has a market cap of $46.52 million. Over the past week, Covenant Transport has one insider who purchased a total of 20,000 shares at the total value of $64,211. My conclusion: lack of additional positive factors, this company appears a risky play.

Data I/o Corp (NASDAQ:DAIO) is a technology company, specifically in the industry of diversified electronics. It has a market cap of $20.61 million. Over the past week, Data I/o has one insider who purchased a total of 6,400 shares at the total value of $17,728 . Data I/o's price is near the bottom, at around 12.18% off its 52-week low. The company is currently losing money operationally. Its business has to turnaround for the situation to become more positive. My thoughts: This is likely a stock very low on my watch list.

Ducommun Inc (NYSE:DCO) is a industrial goods company, specifically in the industry of aerospace/defense products & services. It has a market cap of $89.85 million. Over the past week, Ducommun has 3 insiders who purchased a total of 18,000 shares at the total value of $169,509. Multiple insider purchase occasions are usually a positive sign. Its price is only around 0.35% off its 52-week low. While the stock appears it might have bottomed, investors should proceed with caution. My conclusion: I see more negatives than positives in this company.

Digirad Corp (NASDAQ:DRAD) is a healthcare company, specifically in the industry of medical appliances & equipment. It has a market cap of $43.14 million. Over the past week, Digirad has 2 insiders who purchased a total of 24,200 shares at the total value of $53,814. Multiple insider purchase occasions are usually a positive sign. One concern is the company isn't profitable at this point. The verdict: There aren't enough positive factors to buy this company based on insider purchase alone.

Farmer Brothers Co (NASDAQ:FARM) is a consumer goods company, specifically in the industry of processed & packaged goods. It has a market cap of $114.29 million. Over the past week, Farmer Brothers Co has one insider who purchased a total of 15,000 shares at the total value of $104,100 . One concern is the company isn't profitable at this point. My conclusion: I'd avoid this company at this price level.

First Capital Bancorp Inc. (NASDAQ:FCVA) is a financial company, specifically in the industry of money center banks. It has a market cap of $6.53 million. Over the past week, First Capital Bancorp. has 6 insiders who purchased a total of 305,356 shares at the total value of $610,712. Multiple insider purchase occasions are usually a positive sign. The company is currently losing money operationally. Its business has to turnaround for the situation to become more positive. My conclusion: I may put it on my watch list, but definitely not at the top of the list.

First Savings Financial Group Inc (NASDAQ:FSFG) is a financial company, specifically in the industry of regional - Midwest banks. It has a market cap of $37.97 million. Over the past week, First Savings Financial Group has one insider who purchased a total of 1,368 shares at the total value of $24,624 . Given that its price is only 7.51% off its 52-week high, the overall market sentiment appears positive. I like First Savings Financial Group's operating margin of 28.88%, a good sign for the company's financial health. Trading is fairly active with this company lately, reflected in elevated volume. My conclusion: I would put this company on my watch list.

First United Corp (NASDAQ:FUNC) is a financial company, specifically in the industry of regional - mid-Atlantic banks. It has a market cap of $33.44 million. Over the past week, First United has one insider who purchased a total of 5,000 shares at the total value of $31,165 . The trading volume has been consolidating recently. My conclusion: I don't think the company's overall financial record to be very solid.

Va Software Corp (NASDAQ:GKNT) is a technology company, specifically in the industry of internet software & services. It has a market cap of $93.91 million. Over the past week, Va Software has 3 insiders who purchased a total of 3,414 shares at the total value of $49,523. Multiple insider purchase occasions are usually a positive sign. The company is currently losing money operationally. Its business has to turnaround for the situation to become more positive. In conclusion, I didn't find the company appealing based on its financial record.

Macatawa Bank Corp (NASDAQ:MCBC) is a financial company, specifically in the industry of regional - Midwest banks. It has a market cap of $89.36 million. Over the past week, Macatawa Bank has one insider who purchased a total of 4,662 shares at the total value of $15,990. Given that its price is only 9.84% off its 52-week high, the overall market sentiment appears positive. I like Macatawa Bank's operating margin of 39.04%, a good sign for the company's financial health. The recent trading volume is below average. My thoughts: I may put it on my watch list, but definitely not on top of the list.

Source: Notable Micro Cap Insider Buys Last Week