Investors Taking the Cuba Bet (CUBA)

How long has the U.S. been at odds with Cuba?  For many of us, the answer is “Our entire lifetime.”  And now things may start be finally on track to be turning.  A headline came across the Broad Tape this morning indicating that the Obama administration is set to lift some travel and money restrictions that have been in place against this island nation for decades. It seems hard to imagine that relations will ever be normal as long as anyone named Castro is in charge of the country, but the criteria for ‘normal’ and the criteria for `good news’ seems suddenly very different in today’s world.  We won’t bother you with a historic dissertation nor will we engage in all of the political and personal issues that have affected many in this regard.  But there is an investor angle here that traders have used as their single US-traded vehicle to invest in the future of a US-Cuba normalization: the Herzfeld Caribbean Basin Fund Inc. (NASDAQ: CUBA).

This news today follows similar news last week that certain travel restrictions may be lifted.  We have covered this closed-end fund any time that there was a rumor of either the passing of Fidel Castro or when any olive branches get passed between the U.S. and Cuba.  Thomas J. Herzfeld Advisors, an investment advisory firm specializing in the field of closed-end funds, manages this vehicle.

The company listed the following data on its website today, with the values based upon last week’s close: Net Asset Value (unaudited) $4.37 per share; Closing Price $5.72.

This is not just a play on Cuba. It seeks to make investments that the manager feels are likely to benefit from economic, political, structural and technological developments in the countries in the Caribbean Basin.  This starts out listing this as Cuba, but it also includes many more places: Jamaica, Trinidad and Tobago, the Bahamas, the Dominican Republic, Barbados, Aruba, Haiti, the Netherlands Antilles, the Commonwealth of Puerto Rico, Mexico, Honduras, Guatemala, Belize, Costa Rica, Panama, Colombia and Venezuela.

The closed-end fund invests at least 80% of its total assets in a broad range of securities of issuers including U.S.-based companies that engage in substantial trade with, and derive substantial revenue from, operations in the Caribbean Basin countries.

The company’s listed information at NASDAQ shows it up 10% at $6.20 today, and its 52-week trading range is $3.11 to $9.18 on only about 35,000 shares.

Net asset values rise and fall with markets.  Whether or not this is for you is something that is, well, entirely up to you.  Investors should always look at the premium and discount in a closed-end fund and determine what funds really invest in for their own parameters.  These NAV’s are always just benchmarks, but they can be tracked rather easily.

This is deep into micro-cap territory as well.  Some days it trades under 10,000 shares.  When there is news on Cuba-US relations, we see many times the normal volume.

JON C. OGG