Table of Contents

1.  Market Update
2.  AB Global High Income Fund (AWF)
3.  Guangshen Railway (GSH)
4.  Additional Investing Ideas
5.  Investor Trivia -- The Upside of Down
6.  Featured Topic -- Find Safety Amid Crisis with Gold
7.  Free Investing Resources

Today's Top Stock Picks

Get This 15.5% Yielding Fund Before Its Giant Discount Disappears
As one of the few closed-end funds specializing in foreign government bonds, the AB Global High Income Fund (AWF) currently offers a 15.5% yield and is trading at one of the deepest discounts in the fund's history.
Read More. . .

A $100 Billion Winner That's Practically Guaranteed to Grow
China is spending up to $100 billion on its railway system as part of its recently announced stimulus package. And Guangshen Railway (GSH) is poised to profit.  Read More. . .

Market Update

In the last full week of trading before Christmas, stocks gamely managed to decorate Wall Street in a festive holiday green -- and if there was ever a year where investors needed a Santa Claus rally, this is it.

The Fed played no small part, slashing interest rates in dramatic fashion on Tuesday and igniting a powerful 350-point rally. After lowering the federal funds rate (which banks charge other banks) to a mere 1.0% at its October meeting, the central bank has now dropped the new target to a range of zero to 0.25%.

The unprecedented drop has already brought about a swift decline in the prime rate offered by many lending institutions and lowered borrowing costs on credit cards, home equity lines of credit and other loans. Meanwhile, 30-year fixed mortgage rates (which don't always move with the Fed) have responded by sinking from 5.47% to 5.19% -- one of the lowest rates on record.

None of this is to say that cash-strapped consumers will suddenly rush out in a buying frenzy. But by lowering interest rates to levels that have never before been reached, it's clear that Ben Bernanke and his colleagues are moving aggressively to loosen credit and stimulate economic activity.

In the meantime, we are getting fresh signals daily of just why the Fed has acted so decisively. For example, the Commerce Department just reported that housing starts dove nearly -19% last month -- the steepest decline in decades. And permits for new construction (a reliable indicator of future activity) don't bode well for the months ahead.

On the bright side for consumers, oil prices continue to slide lower. Despite pledges by OPEC to slash production by four million barrels per day, crude prices have just retreated below $34 per barrel. Of course, gasoline prices have followed suit, putting an extra $140 or so back in the pocket of the average driver each month (assuming consumption of 50 gallons).

Perhaps the biggest news, though, was a last-minute plan orchestrated by the Bush administration on Friday to extend a $17 billion lifeline to Chrysler and General Motors. The risky move puts taxpayers on the hook, but it could buy the foundering automakers time to come up with some real restructuring plans. Either way, it lifted morale on Wall Street and forestalled what could have been a high-profile bankruptcy -- at least for a few months.

Looking ahead, the Fed has deployed most of its ammo at this point, bringing interest rates down to near zero. While that may help combat the sluggish economy, it will present unique challenges to fixed income investors. In fact, a 10-year Treasury bond now offers a paltry yield of just +2.14% -- at that rate, it would only take 33 years to double your money.

Fortunately, there are far richer payouts available for investors willing to travel. As you will read below, AllianceBernstein Global High Income (NYSE: AWF, $7.22) is dishing out a hefty yield of over 15%, backed by sovereign bonds issued by foreign governments such as Argentina and South Africa. Better still, turbulence in the closed-end fund market has left the portfolio trading at just 75 cents on the dollar.

Also on tap for today's issue, Market Advisor editor Paul Tracy explains why investors might want to board Guangshen Railway (NYSE: GSH, $19.23). Over the next few years, China will be funneling over half a trillion dollars (16% of GDP) into a bold stimulus package, much of which will be aimed squarely at railroad infrastructure. And with the only line connecting the mainland to bustling Hong Kong, Guangshen looks to be a key beneficiary.

Good Investing!

-- Nathan Slaughter
Co-Editor
TopStockAnalysts Digest

This fund's veteran management team targets sovereign bonds issued by foreign governments. AllianceBernstein Global High Income (NYSE: AWF, $7.22) is one of a relatively small number of closed-end funds that specialize in foreign fixed-income securities.

Just as Uncle Sam must borrow money to function, so do other governments around the world. AWF focuses primarily on emerging markets and holds debt issued by Argentina, Russia, South Africa and other developing nations. The remainder of the portfolio has been invested in a well-rounded mix of corporate bonds. Top corporate holdings include securities backed by Brazil's Vale, Singapore's Flextronics, and India's Vedanta Resources. The overall portfolio straddles the border between short and long duration and between low and high credit quality.

Investors have enjoyed price stability and generous dividend distributions over the years. From January 2005 through this past summer, the fund oscillated in a narrow channel between $12 and $14 per share. Meanwhile, monthly payouts over that span climbed from $0.075 to $0.093 per share.

But with the recent turmoil in the credit markets sending the shares retreating to $7.22, those dividends equate to a tantalizing yield approaching 15.5%.

In recent issues we have talked about unprecedented disruptions in the fixed-income markets pushing yields to record-high levels over U.S. Treasuries. And the emerging markets are certainly no exception. By the beginning of October, spreads on corporate debt in these countries had widened to more than 440 basis points -- and that was before the real flight to quality even began.

Fortunately, the unusual factors that caused the global credit crisis have been easing. Plus, while growth in emerging markets like Brazil and Russia may have slowed a tick, these are still some of the world's fastest-growing economies. And the fund's managers have been specifically targeting the most financially sound of the bunch -- countries with hefty fiscal and trade surpluses, ample foreign exchange reserves, and low debt ratios.

So I wouldn't count on this sale in AWF shares lasting indefinitely. This is a portfolio that has posted healthy double-digit gains in 7 of the past 10 years, racking up annualized NAV returns of +11.4% along the way. That performance lands in the top quartile of the emerging market bond category and is stronger than many stock funds can claim.

AWF is a fine option for investors seeking exposure to the long-term growth prospects of emerging markets, but who aren't quite ready to dip their toes back into equities just yet.

The fund may be a little too volatile for conservative investors, and the risk of future defaults remains real. However, I think the worst is behind us, and management has been taking advantage of temporarily depressed prices and locking in record-high yields.
Better still, this diversified portfolio of sovereign and corporate bonds is currently trading at a -25.4% discount. At 75 cents on the dollar, this is one of the widest discount in the fund's 15-year history. 

This company is one that stands to profit from China's recently announced economic stimulus package. Guangshen Railway (NYSE: GSH, $19.23) offers passenger and freight railway services in southern China, with passenger-related revenues accounting for about 80% of its total. The company's service territory covers an area of about 500 kilometers (300 miles), mainly in an area of southern China known as the Pearl River Delta.

Catalyst(s): The main catalyst for GSH is the fast-growing economy in its core area of operations, covering the cities of Guangzhou and Shenzhen, as well as Hong Kong. The Pearl River Delta is one of the most prosperous and fastest-growing regions in China, which spells rising demand for passenger and freight traffic.

GSH is capitalizing on the growth in its core area of operations by expanding services. For example, the company has added parallel lines to its existing railroads allowing it to increase traffic capacity and increase the speed of its trains. Some of the company's passenger trains now run at 200 kilometers per hour (125 miles per hour), among the fastest trains operating anywhere in China.

The result of track and train upgrades is that GSH is now capable of offering train services as frequently as every 10 minutes along key routes on its network.

In addition to economic growth, my staff and I see the recent Chinese stimulus package as a major catalyst for Guangshen. One of the 10 announced priorities of the package was railroad infrastructure; some analysts believe that railways could be the focus of as much as $100 billion of the $586 billion package.

This may involve the Chinese government actually offering assistance to GSH in building new lines of track or opening up new service territories. Such an expansion would allow further expansion of traffic volumes across GSH's network; more traffic spells higher fares for the company.

Competitive Advantages: There are two potential sources of competition for GSH: other rail carriers and other modes of transport, such as roads.

My staff and I see the first as of only minor concern. The Chinese railroad industry is heavily regulated by the government, both in terms of competition and rates charged. It's unlikely the government would allow another firm to compete directly with GSH on its routes. And to date the government has allowed GSH to expand its fares to allow it to reinvest in network improvements.

Road and air transport are potential competitors. But railways are the most fuel-efficient mode of transport. And road and air travel are more severely impacted by traffic than train travel. In the end, trains are a remarkably efficient means of moving passengers and freight. While road and air links in GSH's region will see increases in volumes, rail offers many advantages and its unlikely to see much of an erosion in growth.

Valuation and Outlook: GSH trades at 12 times forward earnings and has a long term growth rate of +16%. The stock is trading at a sizeable discount to its long-term growth rate. And despite the recent slowdown in the Chinese economy, it's likely the Pearl River Delta region will remain an economic hub; it'll be among the first to see a recovery from the slowdown.

GSH benefits from strong growth potential in its core region of operations coupled with a massive government stimulus package aimed at railroads. GSH looks like a solid "Buy" candidate under $25.