Update – 3/20/2022

Dear Readers,

I have been a little slow with my updates on both my blog as a well as on Twitter. Couple of reasons here: (1) I am going through an important change in my professional life, and (2) I was out vacationing with my family during spring break.

Let me first elaborate on (2). The last two years have been incredibly tough for my family. 2020 started with this dreaded pandemic that not just impacted my family but a lot of folks worldwide. But right around this time, we had a family emergency which forced us to plan a sudden trip outside the country at the peak of the pandemic in March 2020. We were lucky to be able to travel and get back into the country before any major travel restrictions were put in place. If that was not enough, in early 2021, the state that I live in had to deal with one of the worst winter storms that it has seen in over a century. This event left us without water and electricity for almost a week in sub-zero temperatures. We were barely recovering from this when we learned of another family emergency which once again forced us to travel outside the country. This was just around the time when the Delta variant was peaking, which made our travel back into the country very eventful again. Towards the end of 2021, we were again faced with the news of another family member needing to go into surgery.

In the midst of all this madness, my family has never had some time off to chill, relax and have a fun trip somewhere. So with spring break around the corner, we decided to go on a nice road trip to a nearby town which is a 2-hour drive from our place. The trip was a lot of fun. What was amazing was that during this break, all the places that we visited were CROWDED. And from what I could tell, I could barely see anyone wearing masks or practicing social distancing. This didn’t hamper our experience. On the contrary, it actually felt nice. It felt…normal for a change.

I will skip talking about (1) during this post, but I will certainly bring it up in a future post on the blog very shortly. This is pretty significant news and deserves a post of its own.

Anyhow, while I have been busy with life, I had actually stopped looking at my portfolio. Actually, I was only getting the notifications regarding the dividend checks and that made my vacation even more enjoyable 🙂 That right there, my friends, is the reason why dividend growth investing strategy works.

That is it for this post. I will be back shortly with another one within the next few days. Take care, stay safe and healthy!


Monthly Income Update – February 2022

Time for a monthly dividend income update post. Before I start though, I wanted to drop a note regarding the current situation in Eastern Europe. It is difficult to remain focused and talk about things like personal finance and related topics when there is so much turmoil due to a war-like situation. My prayers are with the people of Ukraine and I hope that sanity prevails.

As far as my life, things are extremely hectic. Work is busy as usual, but our family has a whole are busy during the week with various activities. While all of this is going on, I have not even been paying any attention to the market. In fact, preparing for this blog post forced me to open my portfolio and see what was going on! No surprises there, no drastic drops etc.

Lets dive right into the update then.

Dividend Income Received

Sl No.Company / ETF (ticker)Amount
1.Apple (AAPL)$2.20
2. AbbVie (ABBV)$19.96
3.Albertsons Co. (ACI)$1.20
4.Caterpillar (CAT)$1.12
5.Clorox (CLX)$40.42
6.Procter & Gamble (PG)$8.74
7.AT&T (T)$2.12
8.Texas Instruments (TXN)$34.55
9.Verizon (VZ)$23.13
10.Realty Income (O)$11.37
11. STAG Industrial (STAG)$3.47

So a total of 11 companies contributing to the final monthly income of $148.28. At the same time last year, I earned a grand total of $12.86. So that represents an YoY increase of nearly 1053%! While that is great, I do realize that such growth is expected at this relatively early stage of my dividend growth journey. I am also trying to track the percentage of my dividend income earned through shares bought via DRIP strategy (i.e. purely organic growth as opposed growth through the capital I am investing). Unfortunately, it is a little tricky since I was initially using M1 Finance as a brokerage early last year which does not have a traditional DRIP service available like with the big-house brokerages like Fidelity (my current brokerage) or Schwab. M1 uses a pooled-dividend strategy. It is something that I need to put some further thought.

My largest dividend payment came through Clorox closely followed by Texas Instruments. Both are top-tier companies in the my portfolio allocation strategy. I am especially interested in Texas Instruments at present, especially considering the situation in Eastern Europe and its impact on the semiconductor industry.

Buys and Sells

No sell activity during this period.

As far as buys, I added to my following existing holdings: Texas Instruments, T Rowe Price Group and Whirlpool. These were larger tranches weighted in accordance to the category of the portfolio.

I also add a smaller tranche of Clorox, mostly because I believe in this business and the quality of the products. I think the dividend is safe and I do not see this company going away soon, atleast in my life-time. The other company that I was tempted to buy but resisted was 3M (ticker: MMM). With this one, while the current dividend is safe and the stock is attractively priced, I am not sure about the growth prospects in the near term. I am also paying close attention to how the management is going to wade the company through these troubled waters in the next couple of years. This will go a long way in terms of my belief in the company and its overall growth prospects. So far, it has been a mixed bag and hence I am circumspect.


Another month is in the books. I am chugging along in my dividend growth investing journey and staying invested even in these turbulent times in the market. What about you? How did your month go? Are any of the companies listed above in your portfolio as well? What are your thoughts? Please drop a comment and let me know.

The Little Book of Valuation – Book Review

Howdy friends! Hope you are all doing fine, staying healthy and sticking to your investing goals amidst all of the craziness in the world right now. As if things were not depressing enough with this COVID nonsense, the sky-high inflation rates, constant talk of interest rate hikes etc. the world now has a potential-war like situation in eastern Europe. I needed a distraction. So I decided to pick up a book on investing and read. No better way to enrich my knowledge and ignore everything else in the world.

We all know that investing is not an exact science. The process cannot be simply coined as a mathematical expression such as A + B = C. That said, it is not (or rather should not) be based on “hunches” and random guesses either. As an engineer, I like to treat the subject of making decisions based on rationality and through analytical arguments. This is why the subject of valuation interests me immensely.

Simply put, if you cannot ascertain the value of something you are about to purchase, you will make a huge mistake at some point.

So I picked up “The Little Book of Valuation” by Prof. Aswath Damodaran to refresh my understanding of the subject.

Who is Aswath Damodaran?

Prof. Damodaran teaches corporate finance and valuation at the Stern School of Business at NYU. If you follow finance content on Youtube, you may have run into his channel by accident. He also maintains a blog and his website is a treasure chest of all kinds of tools, spreadsheets and models that are available for FREE for anyone to use.

I cannot think of anyone who has written/spoken so eruditely on the subject of valuation. In fact, if you have not already done so, I *strongly encourage* you to go binge watch his playlist on Valuation. It might take a few watches, but you will learn a TON. It is certainly some of best finance content on Youtube, IMHO.

Initial impressions

The “little book” series are generally very good reads. They are concise, distilled and straight to the point. From that standpoint, the reader gains a lot from just a single read and does not need to spend a lot of time reading.

Valuation, however, is a very math-intensive subject. So I was not sure how such a complicated topic could be distilled down without losing the reader. To his credit, Prof. Damodaran does a fantastic job here. He first introduces the fundamentals of why valuation is important, followed by a discussion of valuation fundamentals and tools needed for the trade. Then there is a discussion on approaches to valuation, a walk through of how valuation can be applied to companies that are at various stages in their life-cycle and finally wrapping up with special cases in valuation.

Where valuations can go wrong

Source: Prof. Aswath Damodaran, slide-deck from Valuation class Spring ’22

So everyone understands that valuation is important, but the subject that does not get as much attention is where valuations can go wrong. Prof. Damodaran covers this subject first up. Here were some of my takeaways from the book:

  • Valuation is hard and the odds of getting it wrong are very high.
  • The investor’s personal biases and preconceptions impact his/her ability to value a company objectively. I have written about this subject previously on this blog.
  • Valuation can be made over-complicated fairly quickly. If you can value a company using a model with three inputs, there is no point in using five inputs. Less is more. And while it might sound counter-intuitive, more research and data points can actually lead to more confusion.
  • All valuation models are imprecise. We are not attempting to estimate the fair value of a stock up to 3 decimal places. The idea is to be close enough to the right answer and also add in a sufficient “buffer” (aka margin of safety)

Two approaches to valuation

In the chapters that follow, Prof. Damodaran goes into the aspects of HOW to go about doing valuation. Two primary approaches are discussed: intrinsic valuation and relative valuation. For intrinsic valuation, the value of an asset is determined by the looking at its future cash flows, its potential for growth and its associated risks. Prof. Damodaran focuses primarily on Discounted cash flow (DCF) valuation method here and discusses variations of this method. At its heart, the DCF method is ideal for estimating intrinsic value of an asset since it attempts to ascertain the present value of all estimated future cash flows discounted back at a risk-free rate. That statement in bold is the key, and the endeavor is to find a reliable method of estimating future cash flows for a specific duration AND also coming up with a fair risk-free rate.

Prof. Damodaran submits that while most discussions around valuation typically revolve around the DCF method, most assets in real-life are valued using relative valuation. For instance, if you are in the market for buying a house, you will look at the other similar sized houses in the neighborhood and come up with a “fair” value of the house you want to buy. Can one use a similar method for comparing stocks of two companies? The answer is yes, but with a few caveats:

  • For a fair apples-to-apples comparison, the two companies that you are comparing need to be in the same sector.
  • Then the question is what parameter one can use for the comparison. Common examples include multiples such as price to earnings multiple/ratio, price to book value, price to funds-from-operations (FFO) for REITs etc.
  • Another variation is to look at a company’s multiple against the average of a group of companies within the same sector. The understanding being that by averaging, you are most likely going to be comparing the company of interest against a more “typical” company in the sector.

Each approach (intrinsic or relative) has its pros and cons. For instance, estimating future cash flows for growth companies or companies that are relatively early in the lifecycle is quite challenging (the book dedicates a whole chapter to this subject). Relative valuation is not perfect either regardless of whether you were comparing two companies or a company against a group of companies from the same sector. For instance, during the dot-com bubble in 1999-2000, several companies that were investing in internet were all ridiculously overvalued at the same time.

IMHO, when in doubt, it might be ideal to use a combination of both the approaches to determine if this is an ideal investing opportunity or if something looks fishy.

The chapters that follow go through several interesting case studies where DCF is performed to value companies. 3M (MMM) is picked as an example for the introduction to DCF. In the second half of the book, Prof. Damodaran then discusses how valuations can be performed for companies at various stages in their lifecycle. For his discussion, Prof. Damodaran picks Under Armour (ticker: UA) as an example of a company that is growing rapidly. As an example of a mature company, Prof. Damodaran picks Hormel Foods (ticker: HRL) and explains how valuation could be performed and discusses variations to the traditional DCF method. Finally for a declining business, Prof. Damodaran picks Las Vegas Sands Corp. (ticker: LVS) and explains how such a business should be valued.

In my view, this is where I really enjoyed reading the book and where all the learnings from the previous chapters were reinforced.

Special Cases

Prof. Damodaran dedicates the final half of the book towards companies where the traditional DCF valuation may not be applicable as readily. Three examples covered are: valuing a bank or a financial institution, valuing a cyclical company and finally valuing a company with a large amount of intangible assets (for eg. patents)

Valuing a bank or a financial firm using a method such as DCF tends to be tricky for several reasons: most banks or financial firms are under regulatory constraints, making them treat capital differently than the rest of the market. The standard accounting rules for banks are slightly different as compared to other companies in the market. The treatment of debt within a bank is different as compared to a regular company. In a bank’s case, debt is more like raw material used to fund something else and as a result the process of determining the cost of capital becomes tricky. Finally, it is hard to estimate free cash flows because the aspect of defining net capital expenditure or working capital for a bank or an insurance company can be tricky. In this chapter, Prof. Damodaran introduces the aspect of Gordon Growth Model or Dividend Discount Model as an alternative to estimate fair value. For a more rigorous discussion of the subject, I point the interested reader to this page.

Valuing cyclical companies such as those belonging in the industrial sector or companies that are dependent on commodity prices is not as straightforward. For instance, for companies that rely on natural resources such as oil, how can we factor in the situation where we can potentially run out of this resource completely in our fair-value estimation? To deal with fluctuations in commodity prices, Prof. Damodaran recommends using the normalized commodity prices and earnings for such companies. Choosing this can make a critical difference in our estimation of a fair value. For instance, if the current price for a barrel of oil is $50, but our estimate for normalized price for a barrel of oil is $100, the company we are trying to value may look overvalued simply because of our chosen normalized price of that commodity.


While I am a huge fan of Prof. Damodaran’s lectures and his thoughts on the subject of valuation, my overall sense was that I was a bit disappointed with this book.

The book covers the subject of Discounted Cash Flow valuation method in sufficient detail. The associated case studies using real public companies is also very enriching and rewarding. The book does a great job of laying down the foundation material explaining the WHY of valuation and the common pitfalls with valuation.

Where the book loses its shine is when it starts covering the subject of HOW valuation is performed. I got a sense that a lot of “dense” material was crammed into a few pages to meet the requirements of being “A little book”. Valuation is a math-heavy topic and topics that involve mathematics simply cannot be distilled down. Doing so complicates things for the reader instead of making the material simpler.

As an engineer, I did not find any issue with following the math. I quite enjoyed it on the contrary. I just wished it was given enough “love” in the book :).

Where this book excels is when it covers the subject of valuing companies at different stages in their life cycles and also the special cases where DCF cannot be readily applicable. I thoroughly enjoyed those chapters and gained some interesting insights for me ponder over further.

Have you read this book? What are your thoughts regarding it? Let me know in the comments below.