Cashing in on Fidel's Finale
This closed-end fund invests in companies primed to do business in Cuba.
When Fidel Castro meets his maker and when -- and if -- the communist regime falls, one fund will be ready: Herzfeld Caribbean Basin. Herzfeld invests in companies poised to benefit once the U.S. lifts its trade embargo with Cuba.
Miami money manager Thomas Herzfeld launched the closed-end fund in 1994 as a backdoor way to invest in Cuba. Closed-end funds trade like stocks and can be worth more or less than the assets they hold. Shares of Caribbean Basin (symbol CUBA) popped 25%, to $9, during the first two days of August after the news broke that Castro was seriously ill. In mid August, they fetched $8, or 0.5% less than net asset value (NAV).
Herzfeld seeks companies that not only will cash in if the embargo is lifted, but also perform well on their own. Among its holdings are Florida East Coast Industries, which operates a railroad that runs down Florida's Atlantic coastline, and Royal Caribbean Cruises.
Over the past ten years, the fund returned an annualized 7.1% on NAV (the best way to measure the manager). That trails both Standard Poor's 500-stock index and the SP Global 1200 by two percentage points a year. But if you think Castro's and communism's days are numbered, Caribbean Basin is as Cuba-focused as you can get with a mutual fund.