It’s an odd feeling to turn up for an event and find that you are an audience of one. Investors who attend the annual general meetings (AGMs) of smaller companies in which they hold shares are likely to find themselves in this position, as I did at one of two I attended recently. But for those able to shrug off the awkwardness it can be hugely worthwhile.
This is the first time I have gone along to these meetings as a private investor. I did so after a very experienced investor in smaller companies made the obvious but often overlooked point that it is the only guaranteed opportunity you get as an individual shareholder to gain a better understanding of the business by meeting the people who run it. Since AGMs happen during the working week, most attract no attendees and are purely procedural, involving a vote on a series of resolutions that lasts a few minutes. This year I was lucky enough to have the time.
Both meetings I went to involved trips to the north of England and the day’s travelling was well worth it. I returned with a much better insight into the opportunities and challenges facing these companies. I was able to see the CEO’s latest presentation on the business, ask questions and have one-to-one discussions with members of the board. In one case, I came away with the realisation that the company’s problems were more serious than I had inferred from its announcements; in the other, my questions were candidly addressed by executive board members clearly keen to keep expectations within sensible bounds, and I shall look for opportunities to increase my holding.
Attending AGMs makes sense for several reasons. Smaller companies are generally under-researched by the professional investment community compared with larger ones. This information gap offers a potential advantage to anyone prepared to take the time to get to know the companies better. That obviously involves reading their financial results and corporate presentations, but you can add a great deal of colour and nuance by meeting the management team and getting a feel for the head office.
People who put money into investment funds are unlikely to get a chance to question the fund manager in person. This opportunity is, I now feel, one of the main advantages I enjoy as a direct investor in individual companies over the vast majority of people who entrust their savings to a fund manager and receive a bulletin once or twice a year.
In my own case, AGM attendance is doubly sensible since I deliberately have a very concentrated portfolio of shares and all my eggs, therefore, in a small number of baskets. This gives me fewer companies to keep track of, which makes life easier, but it leaves my risks pretty undiversified. Using the access that AGMs afford gives me an additional way to evaluate the risks I am inevitably running and helps in deciding whether I’m still comfortable with this level of exposure.
Finally, going to AGMs is a valuable reminder that I am investing in real businesses run by human beings, rather than in the collections of numbers that these companies spew out in results statements and trading updates, important though these are. Most private investors have to work on the basis of printed figures and opinions alone, but it is people who decide whether a business prospers or stumbles.
I will be hitting the AGM trail again next year. If the idea appeals, speak to your stockbroker to ensure that you are shown as the beneficial owner of any shares you hold in the broker’s nominee account. With that out of the way, you can look forward to a warm, if slightly surprised, welcome followed by a refreshingly different view of the business. And you’ll probably be offered a cup of tea and a snack for your trouble.