How to Make the Most Out of a Company's Annual General Meeting (AGM)?
We have come to the annual general meeting (AGM) season once again.
Companies with a financial year that ended on 31 December 2020 will be holding their AGMs (be it physical, virtual, or hybrid ones) around this time.
Attending AGMs is one of the ways for shareholders to evaluate the management of a company, an important aspect when it comes to stock-picking.
Warren Buffett once said that when evaluating people, we have to look for three qualities: integrity, intelligence, and energy. He added that “if you don’t have the first, the other two will kill you”.
We can get clues of whether a company’s management has integrity through their behaviours or by observing how they answer certain questions during an AGM.
Here, let’s explore what investors can do during AGMs to make attending them useful and how they can use the platform to size up a company’s management.
But Before That, What’s An AGM?
An AGM provides an avenue for a company to present its audited financial statements to shareholders. Shareholders can scrutinise the statements and ask questions about the firm to clarify any doubts and concerns they may have with the company.
AGMs are conducted under the direction of the chairman of the meeting, who’s also the chairman of the company’s board of directors in most cases.
In general, a listed company must hold an AGM within four months after the company’s financial year ends. So if a company’s financial year ends on 31 December, it should hold its AGM by 30 April the following year.
Prior to the AGM, shareholders will receive a couple of documents (or can download them from the Singapore Exchange or company investor relations website) related to the AGM.
These are stuff like the annual report of the company, the notice of AGM, and the accompanying proxy form for the AGM.
The notice of the AGM will have details of when the AGM will be held and where. Currently, with the COVID-19 restrictions in place, AGMs are held electronically as well.
Here’s an example of the notice of AGM (page 1) for Kingsmen Creatives Ltd (SGX: 5MZ):
Beyond the Free Food
Retail investors rarely get to see and talk to the management of a company except during an AGM.
Attending AGMs allows one to observe subtle clues about management that may not be possible to know just by reading annual reports.
AGMs provide investors with a chance to get the know the leaders of the company and determine whether they are competent enough to manage our money.
Once the AGM has started, notice how the meeting generally is conducted. Is it conducted in a business-like way with decorum, or is it done in a haphazard manner without proper planning? The latter will ring some bells as a shareholder.
We should also observe the body language of the management when they speak.
Is the management team forthcoming or do they mince their words? Are they professional in answering questions posed by shareholders? Or do they talk down on minority shareholders?
There will also be time given to ask questions about the company in general and its audited financial statements. With the virtual AGMs, shareholders may have to send in their questions beforehand to the company.
Some of the questions you can ask are (not all may be relevant to the companies you are invested in):
- What are some of the mistakes you have done over the past year and how did you rectify them?
- What are you doing differently than your competitors?
- What are the current biggest threats to your company and the industry as a whole?
- Are there any important sectors of your market which you don’t address?
- Are there any new entrants into the market in the last two years?
- Are you eyeing any major acquisitions to grow your business?
- What are your plans for capital expenditures for the next few years?
- What are your long-term objectives for profit margins and how do you intend to achieve those goals?
- What are the future growth plans in place to increase shareholders’ value?
- What is the long-term outlook of the company? Where do you see yourself five to 10 years into the future?
After the AGM is over, the management will usually be lingering around (if it’s a physical event, of course) to chat with shareholders.
Instead of rushing to the lunch spread (again, if you are in a physical meeting), you can do further research on the company’s management team by noticing how the managers and directors carry themselves when interacting with people.
Are they humble? Are they approachable and friendly? Are they interested in the concerns of the shareholders?
Those are things that we can’t find on annual reports or media interviews.
But they are important as we are entrusting our hard-earned money to the leaders who make the day-to-day decisions, which can make or break a company.
How Else Can You Make the Most out of AGMs?
Discuss that and more in our community here at Seedly. You can also post your questions and get answers to them right away!
Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.