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Markets go loco over stocks with Cuban connections

By
Richard Morgan
Published Dec. 18, 2014, 2:02 a.m. ET

The prospect of a Cuba Libre had investors pouring into stocks with strong Caribbean connections Wednesday and, in one notable case, a connection that went no further than the company’s name.

Cuba Beverage, in fact, emerged atop the stocks boosted by President Obama’s pledge to end the Cuba embargo of the past 55 years.

Never mind that the San Diego-based company distributes its high-energy drinks domestically in California and New York, with limited international distribution in China and Turkey.

Its name alone was enough to propel the stock 79 percent higher — on five times the normal volume — to close at 3.4 cents per share.

Among stocks with actual reasons to benefit from the relaxation of trade restrictions, the Herzfeld Caribbean Basin Fund took the lead with a 28.9 percent gain on its fund.

The closed-end fund, with the ticker CUBA, recorded 1,000 times its normal volume Wednesday before ending the day at $8.78 per share.

Many holdings in the Herzfeld Caribbean portfolio do stand to benefit from the resumption of US-Cuba trade.

Foremost among those are the cruise lines, which Stifle analyst Steven Wieczynski identified in a research note Wednesday as “a major beneficiary of eased US/Cuba travel restrictions.”

“Cruise travel could prove one of the most compelling ways to visit Cuba,” Wieczynski wrote, “given the lack of hotel and related infrastructure in the country today.”

Roger Frizzell, a Carnival Corp. senior VP, echoed Wieczynski’s assessment about opening the Caribbean’s largest country to US exports — especially since “some infrastructure for cruising already exists in the country, along with several ports.”

The market responded by sending Royal Caribbean up 6.6 percent to $81.84 per share, Norwegian Cruise Line up 4.6 percent to $45. 76, and Carnival up 3.5 percent to $44.61.

For similar reasons, the lodging industry participated in Cuba-generated stock gains Wednesday, with Spain’s Meliá Hotels International’s 12.3 percent gain, to close at $11.68 per share, leading the group.