Just at the turn of the New Year of 2017, you have just been appointed as a Portfolio Manager and Strategic Pricing Specialist of large Asset Management Company. This company has branches in many countries and therefore deals with many clients around the world, with different backgrounds, religions, speaking different languages an exposed to different news and information. The first hint that you are given in your new job is that as you serve many different clients, you must show a strong capability to understand their way of thinking when dealing with asset management and in particular when dealing with portfolio allocation of their wealth. This is not an easy task for you, and for this reason you start some an effort to become familiar with the various backgrounds of the clients which have been allocated to you.

One client has approached you and is keen to help him identify some stocks in his stock market which are undervalued. This is so important for him, as a close relative of his has informally told him that in their stock market there are opportunities in terms of some stock being underpriced. So, this client believes that if he correctly identifies those underpriced stocks he can realize big profits by following the appropriate trading strategy.

You focus on the stock price behavior of stock A and the behavior of the stock market index M of that country. You work very hard to collect information as well as stock market. You manage to obtain the information reflected in the following table regarding the stock price of company A and the stock market index back for 24 years:

Year	Stock price of company A (in $s)	Stock market index (M)
1994	10	1000
1995	12	1010
1996	13	1015
1997	13	1016
1998	15	1020
1999	16	1025
2000	17	1028
2001	18	1029
2002	18	1030
2003	16	1029
2004	15	1028
2005	15	1028
2006	16	1030
2007	17	1032
2008	16	1030
2009	15	1028
2010	17	1028
2011	16	1027
2012	17	1030
2013	18	1032
2014	19	1032
2015	18	1030
2016	20	1034

You also obtain the information that the country's Treasury bill 12-month interest rate is 8%, and the expected return of the stock market index is 10%. When you obtain this information, the stock price expected to prevail in 1 year is 30.

You need to address:

1. Taking into account the specific preferences and tastes of this investor, what advice would you provide to him regarding the portfolio allocation of his wealth? How would you treat the specific attitudes this investor might have against the risk?