Graham, ROS and VIC: two kinds of mistake, one margin of safety

Graham wrote: "The risk of paying too high a price for good-quality stocks, while a real one, is not the chief hazard confronting the average buyer. The chief losses come from the purchase of low-quality securities at times of favourable business conditions."

People buy junk when investing looks easiest, not when things are chaotic.

Vietnam's market has produced both kinds of mistake.

Two questions before buying any stock

Graham taught that buying a stock exposes you to two distinct risks, and avoiding both requires asking in the right order.

Question 1: Is this a good company?

Question 2: Is the stock selling at a reasonable price against what it is worth?

Most investors ask question 1 and skip question 2. Others ask neither; they just see a price going up. This is the root of most large losses in markets.

Graham watched this throughout his career and wrote: "Investors often mistakenly assume that business prosperity is equivalent to safety."

Vietnam's market has produced some painful demonstrations. And the two most prominent stocks illustrate two different kinds of mistake.

ROS (FLC Faros): asking neither question

FLC Faros (ticker ROS) was a construction company inside the FLC ecosystem. It listed on HOSE, and in November 2017 the price touched 155,700 dong a share.

Back then ROS was called a "super stock". It was in the VN30. The market was in a strong run. Sentiment was extremely optimistic. People bought ROS because it was going up; nobody stopped to ask: "what is this company actually worth?"

Had they asked, they would have found this: FLC Faros was investigated for inflating its charter capital from a few hundred billion to nearly 4,300 billion dong through falsified accounting entries, with no real money contributed. The profits were manufactured. The financial statements did not reflect reality. The intrinsic assets did not match the books.

In 2022 Mr Trinh Van Quyet was arrested. ROS was compulsorily delisted on 5 September 2022. The price at delisting: 2,510 dong.

From 155,700 to 2,510. Anyone who bought at the top lost 98% of their capital.

This is exactly what Graham warned about: buying low-quality securities precisely when making money looks easiest. Nobody questions quality while the price rises daily. Prosperity gets mistaken for safety.

VIC (Vingroup): asking question 1 but skipping question 2

Vingroup is a completely different animal from ROS. A real conglomerate, real assets, real operations. Vinhomes generates cash. VinFast is present in international markets.

Question 1 has a fairly clear answer: this is a real company with a working ecosystem.

Question 2 is where the problem sits. As of May 2026 VIC trades above 220,000 dong a share. The basic figures show:

A P/E above 80 means you are paying more than 80 years of current earnings for the stock. With Vietnamese 10-year government bonds yielding around 5% a year, Graham demanded an earnings yield of at least 10%, equivalent to a maximum P/E of 10. At 220,000 dong, VIC trades at eight to ten times that threshold. ROE of 5.55% is below a bank deposit rate. The earnings yield below 1.5% is far under a safe bond. There is no dividend.

None of this means VIC will fall. The market may keep pushing the price up if expectations for VinFast and Vinhomes keep rising. What it does mean is: you are paying a great deal for an uncertain future. And when you buy the future, the margin of safety is wiped out entirely.

Graham was explicit: "Paying too much for a stock, even a high-quality one, eliminates the margin of safety and can be very risky in itself."

Two kinds of mistake, one lesson

Graham was clear that the second risk, overpaying for a good stock, is real but not the most dangerous. The most dangerous remains the first: buying poor quality while the market is optimistic.

Why? Because in a good market people buy more, junk rises too, and that rise gets read as evidence the stock is heading the right way. Nobody stops to check the foundation while the price goes up every day.

Three questions to answer before you buy

From those two examples, a simple checklist for any stock:

1. Is the foundation real? Are the financials audited by a credible independent firm? Does real cash flow match reported profit? Does the company genuinely make money from operations?

2. Is the price reasonable against value? Is the P/E justified by actual growth, or only by expectation? Is the earnings yield more attractive than a bond?

3. What am I paying for? If you are paying for current results, that is value investing. If you are paying for an uncertain future, that is speculation. Both are legitimate, but you must know which one you are doing.

Graham did not say you cannot buy VIC. He said: when you buy VIC at a P/E above 80, you are speculating on Vingroup's future, not value investing. Speculation can pay, but there is no safety net underneath.

Vietnam's market will have more bull runs. There will be stocks that rise and "prove" every expectation. There will be stretches where everyone is making money and nobody asks the hard question.

That is exactly when Graham wants you to ask the hardest one.

Silent discipline. Compound value.