Ten Ways to Invest in Cuba

Now that the United States is easing restrictions on Cuban Americans traveling to Cuba and allowing them to send money to their Cuban relatives, investors are looking for any possible Cuban investment plays. Other good news for Cuba includes the fact that U.S. telecom companies are now allowed to do business in Cuba. Also, many believe that Obama may improve relations with Cuba, which may lead to more loosening of restrictions of all Americans traveling to Havana. Here are a few companies that have Cuban connections.

Freeport-McMoRan Copper & Gold Inc. (FCX) is the large mining company involved in the exploration and production of copper, gold, and silver, along with other minerals. The Moa Mine located at Moa Bay in Cuba is owned by Freeport-McMoRan but was confiscated by Fidel Castro in the late 1950's revolution. The stock has a forward P/E of 17, and a PEG of 8.75.

Sherritt International (SHERF.PK) is a Toronto, Ontario based mining, and oil, and gas company that is one of the largest foreign investors in Cuba, having more business in Cuba than any other Canadian company. A major portion of their revenues are generated by the Moa Mine in Cuba, as a joint venture with a Cuban government company. They also operate Varadero, Canasí, Yumuri, Puetro Escondido oil and gas fields which they have leased in Cuba. In addition, Sherritt owns, Energas, the Cuban electric utility. The stock trades on the Toronto Stock Exchange in Canada and on the Pink Sheets in the United States, and recently generated negative earnings of 91 cents per share.

Since more cruise travel should be opening up in the near future with Cuba, Carnival Corp. (CCL), which is one of the largest cruise and vacation companies in the world, should participate in that business. Their cruise lines which operate out of North America, the United Kingdom, Germany and Italy, include Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn Cruise Line and Windstar Cruises in North America; AIDA in Germany; Costa Cruises in southern Europe; P&O Cruises, Cunard Line, Ocean Village and Swan Hellenic in the United Kingdom; and P&O Cruises in Australia. They operate a fleet of 81 ships, and will be receiving another 20 ships between now and 2011. They are headquartered in Miami, Florida and London, England. They have a P/E of 9, PEG of 0.8, and a yield of 6.3%.

Royal Caribbean Cruises Ltd. (RCL) , which should also participate with trips to Cuba, owns Royal Caribbean International [19 cruise ships with over 44,000 berths] and Celebrity Cruises [9 cruise ships with over 15,000 berths]. They also own Pullmantur S.A., which has five ships in Europe and Latin America. The company plans on having six more ships by the end of 2010. They also offers land tour vacations in Alaska, Canada and Europe. They are headquartered in Miami, Florida. Their P/E is 4, P/S 0.58, yield 6%.

Herzfeld Caribbean Basin Fund Inc. (CUBA) is a closed end fund which is a diversified way of playing the Cuba economy. It invests in stocks of the Caribbean Basin Countries and the United States. The stock has recently generated negative earnings and yields 2.9%.

Cuban Electric Co. (CGAR.PK) owns property in Cuba that was confiscated by Castro. The company trades occasionally on the Pink Sheets.

Sol Melia (SMIZF.PK) which is based in Spain, operates about 25% of the hotels in Cuba. Net profit margin is 12% and operating margin of 19%.

Trailer Bridge Inc. (TRBR) is a marine freight carrier between the U.S. and Puerto Rico which is expected to benefit from expansion to Cuba at some point in the future. The stock has a forward P/E of 9.

Petroleo Brasileiro (PBR) is in partnership with Cuba's government-owned oil company. The stock has a P/E of 10.

Repsol YPF SA (REP) is a Spanish oil and gas company with significant operations in Argentina.. They are drilling offshore Cuba for oil. The stock has a P/E of 7.5, and a PEG of 1.7.

Stocks in other countries may participate in the growth of Cuba, including Mexico, Colombia, Brazil and Argentina.

Disclosure: Author owns CGAR.PK and PBR.

Comments

[mdh:]

May be prudent to mention that CUBA is a closed end fund that trades at a 70% premium to NAV after Mondays runup. I would wait for a pull back on that one.

Apr 14 08:42 AM

[mdh:]

I meant you may want to wait for a pull back. Its your money.

> May be prudent to mention that CUBA is a closed end fund that trades
> at a 70% premium to NAV after Mondays runup. I would wait for a pull
> back on that one.

Apr 14 08:49 AM

[kelm:]

Cuba has significant potential which other nations have been tapping into for some time as best they could given our governments constraints. I would not put too much stake on properties that were once owned by a US company though. That will be a long time before any legal action works through the courts to redress confiscation if ever. More likely those companies would get preferential investment rights.

Apr 14 09:37 AM

[Stone Fox C...:]

Whats the likelyhood that FCX would get the mine back? Just b/c the US restarts relations with Cuba doesn't mean that FCX will get the mine back.

Apr 14 09:53 AM

[William Taylor:]

Well, I have owned stock in Leisure Canada (LCN) in Vancouver, for several years and the stock in the "premiere developer of resorts in Cuba" has gone nowhere. They say they own or are developing these exclusive properties but nothing happens, ever. Real of fake? Time will tell, it always does. Here is the link for you gamblers out there. www.leisurecanada.com/

Apr 14 10:01 AM

[realold:]

Wow, you guys haven't lost enough money at home? Now, you want to throw money away in communist Cuba? I would suggest run, do not walk, in any other direction.

Apr 14 01:36 PM

[john redmond:]

Have you guys forgotten that Castro murdered Eleon's mother by machine gunning her as she swam in the water with her son. Her only crime that she wanted a better life for him in the United States. Have you no shame.

Apr 14 02:07 PM

[Rohan C. Pease:]

Cuba is such a long shot, really just give me your money insted! How can you reccomend materials and oil companies for this, Cuba is so small it doesn't matter, there are much better reasons to buy PBR and FCX the this thesis.

Apr 14 03:00 PM

[a. palmer jr.:]

I wouldn't mind investing in a Cuban cigar. Nothing else though.

Apr 14 05:57 PM

[jfkfan:]

Investing in Cuba is insane. As the article states, the Cuban government rightfully confiscated the Moa mine back from Freeport McMoran. I am curious as to what Rohan C Pease is referring to with his remarks "there are much better reasons to buy PBR and FCX then this thesis"? If your thinking about buying or holding on to FCX stock for the long run, you owe it to yourself to read the article "Freeport McMoran Could be on their way out of Indonesia" www.fmisucks.org/fmis_...

When Fidel Castro seized the Moa mine it almost sent Freeport McMoran into bankruptcy court. When the radical government of West Papua seizes the Grasberg mine, anyone holding FCX stock is going to be crying. This time, Freeport McMoran will not have an American president to assassinate to help them out of their problems. See article "Is Freeport McMoran responsible for John F. Kennedy’s Assassination? very likely!" www.fmisucks.org/jfk.htm

Apr 14 05:58 PM

[ECONOMICS 101:]

Wow what a tirade of comments.
We went from Fidel Castro to John F. Kennedy and his assasination to the murder of Eleon's mother. At the end of the day Rohan is correct, Cuba is so small and insignificant in the grand scheme of making money.
Yes, all the cruise lines will make money, but NOT more money, people will redirect their travel dollars. There are NO new dollars to be had.
Some of the infrastructure plays will make new money.
By Johnathan Vrozos
johnathanvrozos.ca

Apr 14 06:49 PM

[anarchist:]

I don't understand what is in Cuba that they need the U.S. to buy. They produce sugar, a few minerals, cigars and maybe have a small pond of oil off shore. All those products are or can be consumed on the world market excluding the USA. Yes, the U.S. has an "embargo" but if you go to Havana you will see the harbor full of international shipping. Now maybe Cuba could get some U.S. money in the form of loans from the world bank but where's the investment? There is some tourism from the UK and Canada but it's limited. Maybe if the U.S. "normalizes" relations with Cuba it can put another Batista in power and the mob can go back in and there will be some casinos to invest in-of course all this won't help the locals much.

Apr 14 07:01 PM

[kotika98:]

i loved it when you say FCX owns the Moa Mine, and then without catching breath suggest buying Sherritt International whose "major portion of their revenues are generated by the Moa Mine in Cuba".

Apr 14 11:29 PM

[Eric Fox:]

Don't forget sovereign debt of Cuba:

www.cubamania.com/cuba...

if you really want to speculate.

Apr 16 06:46 AM

[jupenya:]

I smell a lot of Kool-aid made in Maddox type vineyard. The Repsol & Petrob. are good play regardless, all the others are a joke - even the cruise lines - Habana instead of Cancun - and the facilities are ancient not much change - 5 yrs w/ castros - 2 yrs w/out castros. Anyway, cruisees just do a little walk about and maybe have a Mentirita ( Cuba Libre). One more - the relaxed rules are for CubanAmerican - not yet for regular US citizens.

Apr 17 10:35 AM

[Mary McGrath:]

I have just heard the Leisure Canada story and when I attempted to buy some ( as a gamble) was told that as a US investor I could not buy the stock. Are you Canadian? If not, how did you buy it?
Mary McGrath

On Apr 14 10:01 AM William Taylor wrote:

> Well, I have owned stock in Leisure Canada (seekingalpha.com/symbo...)
> in Vancouver, for several years and the stock in the "premiere developer
> of resorts in Cuba" has gone nowhere. They say they own or are developing
> these exclusive properties but nothing happens, ever. Real of fake?
> Time will tell, it always does. Here is the link for you gamblers
> out there. www.leisurecanada.com/
>

Apr 17 03:04 PM

[Amouna:]

It can't be any worse than US one for now....



On Apr 16 06:46 AM Eric Fox wrote:

> Don't forget sovereign debt of Cuba:
>
> www.cubamania.com/cuba...
>
> if you really want to speculate.

Apr 17 05:14 PM