|
Castro Death Watch Stimulates
Cuba Fund
Christina Wise, Investor's
Business Daily, January 19, 2007.
Fidel Castro's sudden illness last summer
focused the world's attention on the island
nation, Herzfeld Caribbean Basin has long
been interested in the region.
The Miami-based, closed-end mutual fund
(NASDAQ:CUBA - News), which was founded
in 1994, invests in companies doing business
in the Caribbean basin as well as in those
poised to do business with Cuba if the U.S.
trade embargo is lifted.
"Two-thirds of the (stocks in the)
portfolio were picked with two ideas,"
said Thomas J. Herzfeld, the fund's portfolio
manager and chairman and president of Thomas
J. Herzfeld & Co. "One, companies
that would do well if there were no changes
in Cuba -- and they have -- and two, companies
that would benefit strongly from resumption
of trade with Cuba."
Through Thursday's close, Herzfeld's share
price had more than doubled in just six
months.
Fixed Shares
Herzfeld Caribbean is a closed-end fund,
which is a mutual fund that trades like
a stock. It has a fixed number of shares,
and since investors can't redeem shares
like open-end funds, it's an ideal vehicle
for investing in emerging economies.
"Closed-end funds, dating back to
the 1800s, are the best way to invest in
an emerging market where there's a thin
or no (stock) exchange," Herzfeld said.
"The reason for that is that with mutual
funds, they have to take in new money and
give it back at the whims of shareholders."
But he also cautions that no one knows
when the U.S.-Cuba trade embargo will disappear.
"The fact that Castro dies doesn't
mean the embargo is going to be lifted automatically,"
Herzfeld said.
Herzfeld Caribbean's largest holding, which
accounts for nearly 16% of its portfolio,
is Florida East Coast Industries (NYSE:FLA
- News). The stock hit an all-time high
in mid-December and has since pulled back
to its 10-week moving average line.
Railroad
Florida East Coast develops commercial
and industrial real estate and operates
railroads in Florida.
"It operates the main freight line
that runs between Jacksonville, Florida,
and Miami," Herzfeld said. "We
believe a large portion of the freight going
to Cuba will run up and down the east coast
of Florida. The railroad gauge is the same
(in Cuba) as here."
The fund's fourth-largest holding,Seaboard
(AMEX:SEB - News), ventured into new-high
territory last week.
"Here's an example of a company doing
very well now and will continue to do very
well once the embargo is lifted," Herzfeld
said. "They operate the largest fleet
of containerships in the Caribbean and also
are in the food business. We started buying
SEB very early in the fund's life at about
$200 a share."
Other stocks in the fund include Copa Holdings
(NYSE:CPA - News). The Panama-based airline
flew out of a base in mid-August and through
Thursday had climbed 125%.
Copyright
2007 Investor's Business Daily, Inc.
| 
