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During the window from April to May, many companies usually file their financial results for the previous year. What follows is a mandatory meeting, or commonly known as the annual general meeting (AGM), that is held between the company’s shareholders and directors once a year as its name suggests.
At the meeting, the directors share with shareholders the past year’s business performance, strategies and the outlook going forward. On top of that, shareholders get to vote for the election of new or existing directors, approval of directors’ fees, auditors, payment of dividends, etc.
Most importantly, AGMs give you an opportunity to pose any questions you have to the directors of the company. Based on how they answer your questions (or not), this gives you an insight into how open and transparent the board and management are — especially when faced with hard questions.
SIAS – Securities Investors Association (Singapore) – has also encouraged minority investors to speak up and engage with the management of listed companies at AGMS. In 2016, it launched the SIAS Q&A on Annual Reports initiative to come up with relevant questions that shareholders can raise during their respective AGMs.
I’ve been attending AGMs of the companies I have invested in for the past nine years now. The information I’ve gleaned from them has been highly valuable and extremely useful for my investment decision-making process. It has led me to higher gains by staying invested in companies whose management teams I felt were clear and competent on how to bring a company forward in the coming years.
It has also helped me pull out of investments whenever I felt the AGM threw up red flags that I needed to take heed of, saving me a lot of money in the process. Because of this, I attend AGMs diligently each and every year.
Here are five reasons why you should attend AGMs:
Well, the most obvious things first – you get free stuff! I receive goody bags pretty often from mainly the brick and mortar companies. I attended a healthcare company’s AGM once and they gave me their in-house nutritional products like vitamin C pills, menopause tablets (which I struggled to find a personal use for) along with other goodies. One instant coffee manufacturer gave a few packets of their instant coffee products which were gladly received by everyone there.
But it doesn’t just end there. You get free food as well! For smaller AGMs of 50 or fewer people, meals usually come buffet style, which is nice. For larger-scale AGMs where standing in a buffet line can lead to elbows and handbags being jabbed into your ribs, the free food might come in the form of nicely-packed bento sets or food vouchers. Still free though.
But there is also a free show you can watch…
April/May isn’t time for the Hungry Ghost Festival, but yet you get to see hordes of hungry people rushing to the food area once the meeting is over. At one AGM I attended I saw a group of shareholders literally running out the door and making a beeline for the food before the directors had concluded the meeting!
Another incident held in a five-star hotel, I witnessed a few shareholders taking out their own plastic bags (they obviously came fully equipped) and scooping up fistfuls of chocolate bars that were laid out on a table for everyone to sample. They grabbed everything. Needless to say, the only way I was going to get a taste of those chocolates was to head to the nearest 7-11. One of the contributors of ValueBuddies.com once humorously said to me: ‘Any old uncle or auntie becomes a national sprinter when the food is prepared and ready.’
So if you’re there solely for the food (and trust me, there are others just like that), be prepared to push, shove and rush with your fellow shareholders to be first in line for the feast. And don’t be surprised if you see someone brings along a trolley (I read this in the newspapers few years ago). However, these incidences may soon become a thing of the past as many companies have been trying to reduce unseemly behaviour like this by handing out vouchers or goody bags instead.
Free food or goody bags aside, I also witnessed a meeting in Malaysia where a shareholder sang a Japanese song to commend a company’s good performance. He sang for a few minutes in a high-pitched voice and the chairman had hard time trying to stop him despite numerous attempts! In the end, they cut his mic and the chairman thanked him and wished him well. Really one of my most memorable AGMs!
As you can tell, I do not attend AGMs solely for the goody bags and the free food. I go there for the more scrumptious bits — by talking to the company’s insiders (CEO, CFO, chairman, auditors, etc.), I get access to a lot of information not yet written in the annual report, any press release or analyst report.
During the meeting, shareholders pose questions to the board in front of other shareholders. Usually, the answers given are more politically correct. Post-meeting is the best time when shareholders can ask more sensitive questions and, from my personal experience, most management are willing to give you more candid answers. As a matter of fact, directors tend to share more sensitive information about their company one-on-one and face-to-face when it wouldn’t be wise for them to share publicly.
Note that smaller companies tend to have a handful of investors and their AGMS conclude relatively fast with fewer questions being asked compared to larger AGMs. Because of this, you get a chance to ask more questions yourself and receive answers which can be extremely insightful and educational.
Not to say large AGMs are not insightful. One of the world’s largest AGMs, Berkshire Hathaway’s, has a crowd of over 40,000! And investors from all over the world flock there for one reason – to learn from the great man, Warren Buffett, himself. (I flew to Berkshire’s AGM in 2016. Massive.)
By observing their body language and candour (or lack of), you can tell if the directors are being truthful and ultimately aligned with your, the shareholders’, interests.
At an AGM many years ago, I remember a former chairman of a Singapore-listed company boasting that its social networking platform which combines e-commerce and gaming is far better platform than Facebook. It was a really bold statement, but I did a quick ground check and not one person I spoke to ever heard of their platform before. The last I heard, the chairman was hauled up by the CAD for possible breaches in the Securities and Futures Act.
As a rule of thumb, I usually avoid management who sell pipe dreams to investors. You can often hear them proclaiming that their company or product will be the next Facebook, Google, Amazon, Berkshire Hathaway, or whatever. Now there is nothing wrong with modelling after successful peers in the industry, but when the management sells you a shiny, far-fetched dream when their actions speak otherwise, then that it is a huge red flag for me.
Though observation can be subjective from person to person, it is still better meeting and interacting with the management to get a gut feel whether you can trust the people who are supposed to be growing your hard-earned money for you.
As what Shelby Davis, one of the most successful investors ever, said: ‘Face-to-face meetings separate the bluffers from the doers.’
By talking to other investors, you get to learn fresh perspectives why other investors invested in the same company as you. You might discover new distinctions that might improve your research and analytical skills as an investor.
Sometimes, if you are really hit it off, they might invite you to their private mastermind group for discussion of investment ideas. You wouldn’t know such a group exists until you get invited to one.
So network, network, and network but be selective with who you talk to. Generally, I prefer to talk to savvier investors who seek to truly understand their investments and ask quality questions during the AGM than shareholders who ask common questions like: Why hasn’t the share price moved up?’
It’s rare but if the management likes you, they might invite you for lunch which gives you the chance to ask more insightful questions regarding the business. I had this privilege with one of the directors sitting on a leading Hong Kong-based multinational conglomerate.
Over the lunch meeting, I learned so much about a company where he holds a post as chairman. I walked away knowing that the company (and my investment) was in great hands. Today, that company has made some great returns for my stock portfolio.
If you’re already a shareholder of a company, you can simply go in person by bringing your identity card along.
Alternatively, if you’re not a shareholder, a quick tip to get into the AGM is to buy an odd lot from the open market before the AGM (make sure you buy before the closing date of the share registrar). Shares from odd lots cost less and it’s cheaper than having to buy a full lot of one hundred shares. (However, odd lots may be hard to come by, so your next best option is one lot.) This tip is really useful especially if you’re still undecided on whether to invest in a particular company and you want to attend the AGM to find out more.
In conclusion, do attend your AGMs when they come around! They hold valuable information about the companies that could make a positive or negative impact on your investments.
I mean, if you’re going to invest thousands of dollars of your hard-earned money in a company, doesn’t it make sense to spend those two hours just to make sure your investment is safe and sound? It makes sense to me and I hope it does to you as well.
If not, well at least you get a free meal or some menopause tablets that might come in handy someday.
This article is written in support of the SIAS Q&A on Annual Reports initiative to raise the standards of AGMs, and encourage minority shareholders to ask questions, engage, and interact with the management of listed companies. Founded in 1999, SIAS is a registered charity, Institution of Public Character, and industry watchdog that aims to promote exemplary standards of corporate governance among Singapore-listed companies to ensure that investor rights and interests are protected.