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Cuba thaw....is there a play?
Old 12-19-2014, 12:35 PM   #1
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Cuba thaw....is there a play?

With the coming thawing of relations with Cuba and the US, what are the possible stock plays that you might foresee?

Cellular, cruise lines, autos Your thoughts??
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Old 12-19-2014, 12:50 PM   #2
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I don't know yet. It's too early but I saw in the news that some US companies are interested to start doing business in Cuba: Mastercard, Caterpillar, Pepsi,
Cisco, etc.
I think it is a very good decision on Obama & Raul C to do it.
It is a big country which is 50 years behind times. Think of all the possible US exports to that country, from grain, food, computers, tractors,
franchises, machineries, medical equipment, airplanes, trains.
Even if the country is poor, it can start a boon for second hand industrial materials and equipment. That's a lot of money for companies willing to go there.
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Old 12-19-2014, 12:52 PM   #3
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With the coming thawing of relations with Cuba and the US, what are the possible stock plays that you might foresee?

Cellular, cruise lines, autos Your thoughts??
Cuba doesn't have enough money or tourist attractions to make a big impact on corporate earnings during the next few years at least.
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Old 12-19-2014, 12:57 PM   #4
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In the immediate future, lots of scam e-mail and cold callers pushing 'make money fast in Cuban real estate'. These are already running, so be careful.

Remember the Helms-Burton Act is still in place and will remain for the foreseeable future. This bans trade, including tourism. It permits litigation against anyone trying to transact in assets that were nationalized or confiscated from US nationals in the revolution. (Land for that cell tower? Used to be a sugar plantation. US Sugar would like to see you in court, please.)

No cruise ports, auto sales, or American cellular companies in the near future.
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Old 12-19-2014, 01:22 PM   #5
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Cuba doesn't have enough money or tourist attractions to make a big impact on corporate earnings during the next few years at least.
I would think that, when the thaw becomes "official", there would be many finance companies and countries willing to lend Cuba money to start a lot of building activities. My guess is that construction and maybe resort-oriented items may lead the way, as that is where both investment and providing jobs for the people can be done quickest. However, I agree that it will not be a short term impact on earnings. Perhaps an international fund or ETF that includes Cuban-related investments for the long term (5-10 years at a minimum) is a consideration. Of course, this is just my speculation and should not be taken as investment advice.
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Old 12-19-2014, 02:09 PM   #6
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Ignore the noise.
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Old 12-19-2014, 02:42 PM   #7
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Maybe the Mafia money will go back into Cuba...this time through legitimate businesses.


They helped run Cuba prior to the revolution.
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Old 12-19-2014, 02:50 PM   #8
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Is there any cigar maker/exporter in Cuba that's a public company whose shares I can buy?

I do not think there's any, as it is not a true capitalistic country, right?
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Old 12-19-2014, 04:54 PM   #9
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Is there any cigar maker/exporter in Cuba that's a public company whose shares I can buy?
If you are a US citizen or resident, that would place you in violation of the Helms-Burton Act, the "Trading with the Enemy Act" (50 U.S.C. App.16(b)), and if you tried a debt/equity swap, Section 1704(b)(2) of the "Cuban Democracy Act of 1992".

It turn out, though, that the Department of the Treasury does allow investing in a third-country company that has interests in Cuban commercial activities, as long as it doesn't have a controlling interest. So, you could buy shares in the French-Spanish conglomerate Altadis, which has put almost $500 million into a joint venture with Habanos S.A. of Cuba for the exclusive right to market Cuban tobacco products internationally.

That's about as close as I can get you on ceegars.
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Old 12-19-2014, 09:24 PM   #10
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Actually, since 2003 the US has been Cuba's main food supplier. We also supply medicine. The embargo was was relaxed in the year 2000 when congress passed and President Clinton signed a change to that law. IMO, what will change is Cuba's ability to borrow money from the US - unless that is found to be illegal. Hopefully us taxpayers won't get stuck holding the bag, as Cuba has a horrible record in paying back their debts. Here is an excerpt from Wikipedia regarding the 2000 change in the law.


"In response to pressure from some American farmers and agribusiness, the embargo was relaxed by the Trade Sanctions Reform and Export Enhancement Act, which was passed by the Congress in October 2000 and signed by President Bill Clinton. The relaxation allowed the sale of agricultural goods and medicine to Cuba for humanitarian reasons. Although Cuba initially declined to engage in such trade (having even refused U.S. food aid in the past,[25] seeing it as a half-measure serving U.S. interests), the Cuban government began to allow the purchase of food from the U.S. as a result of Hurricane Michelle in November 2001. These purchases have grown since then, even though all sales are made in cash. In 2007, the U.S. was the largest food supplier of Cuba, which nevertheless is largely self-sufficient,[26] and its fifth largest trading partner."
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Old 12-19-2014, 10:04 PM   #11
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I was watching an on location news bite from Cuba and saw more 1950s American cars drive by in that 3 minute segment than I have in the past 30 years here. I thought island weather was tough on metal. It is amazing how they could keep those cars operational as these were not restored ones!


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Old 12-19-2014, 10:18 PM   #12
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Stock plays:

Sherrit International S-TSX
Melia Hotels Spanish stock exchange
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Old 12-19-2014, 10:22 PM   #13
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Short US cigar companies.
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Old 12-20-2014, 06:45 AM   #14
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Think Las Vegas.

Flight time Miami to Havana 28 minutes.
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Old 12-20-2014, 07:26 AM   #15
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I think you can look at the precedent that has been set with Venezuela and China to see who benefits from any trade thaw with Cuba.

Any company that is based in Cuba, will be owned by the Cuban government. Any US company will probably be under great stress to provide a lot of tax revenue to the Cuban government. Cuba is communist, and will stay that way. Even more so with additional US support. The Cuban ‘thaw’ will help keep the current government in place.

The main reason companies are in China, is for the opportunity to sell their goods to the 2 billion Chinese people. Even if only 1% are able to buy stuff, it's a lot of people and revenue. The other reason to do business in China is cheap labor and fewer regulations. Most manufacturing companies benefited quite a bit, as they were able to procure cheaper goods to sell.

In Venezuela, companies have found that their riches can quickly be taken away. It will be the same in Cuba. Venezuela will be the model for Cuba; Venezuela is Cuba’s number one trading partner and is most similar in the form of government. Canada will be the major country impacted to the negative since they are another large trading partner to Cuba.

Cuba has a small pool of people, (11 M) most in poverty, hardly worth setting up factories to sell internally, like in China. A manufacturing company would likely not sell many widgets to Cubans. Even if every Cuban could buy a widget, it would be a very small windfall. But the companies would be able to access the cheap labor, similar to a manufacturing company in Mexico, and supply the US. And if it was really going to be lucrative, some Canadian company would have already done it.

Cruise companies might benefit, as it would add another dimension to the ports. But it would not be a lot different than any of their other ports. It would be a novelty at first, not any better, just different. If it became a gambling paradise, or drugs and prostitution were legalized, it may be different. Perhaps an offshore banking haven would work, like the Cayman Islands, but it impacts few people locally. Cuba also has a lot of oil off shore, so drilling companies, or companies that supply drilling equipment, might benefit.

Cuba should have already been a mega paradise resort island, like Hawaii or back in the 50s. They should have been self-sufficient. They can grow food 12 months out of the year, but they need to import 80% of their food. They could have set up factories to supply their excess labor to the world, but they have failed in that regard.

So, I would look for the benefits of any US thaw to be to the Cuban Government. The Cuban government will be able to provide more to the people, at the expense of any businesses that set up there. And the Cuban people will see their government as their benefactors and they will be grateful to Castro family for the privilege of being able to eat.
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Old 12-20-2014, 07:48 AM   #16
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Think Las Vegas.

Flight time Miami to Havana 28 minutes.
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I think you can look at the precedent that has been set with Venezuela and China to see who benefits from any trade thaw with Cuba.

Any company that is based in Cuba, will be owned by the Cuban government. Any US company will probably be under great stress to provide a lot of tax revenue to the Cuban government. Cuba is communist, and will stay that way. Even more so with additional US support. The Cuban ‘thaw’ will help keep the current government in place.

The main reason companies are in China, is for the opportunity to sell their goods to the 2 billion Chinese people. Even if only 1% are able to buy stuff, it's a lot of people and revenue. The other reason to do business in China is cheap labor and fewer regulations. Most manufacturing companies benefited quite a bit, as they were able to procure cheaper goods to sell.

In Venezuela, companies have found that their riches can quickly be taken away. It will be the same in Cuba. Venezuela will be the model for Cuba; Venezuela is Cuba’s number one trading partner and is most similar in the form of government. Canada will be the major country impacted to the negative since they are another large trading partner to Cuba.

Cuba has a small pool of people, (11 M) most in poverty, hardly worth setting up factories to sell internally, like in China. A manufacturing company would likely not sell many widgets to Cubans. Even if every Cuban could buy a widget, it would be a very small windfall. But the companies would be able to access the cheap labor, similar to a manufacturing company in Mexico, and supply the US. And if it was really going to be lucrative, some Canadian company would have already done it.

Cruise companies might benefit, as it would add another dimension to the ports. But it would not be a lot different than any of their other ports. It would be a novelty at first, not any better, just different. If it became a gambling paradise, or drugs and prostitution were legalized, it may be different. Perhaps an offshore banking haven would work, like the Cayman Islands, but it impacts few people locally. Cuba also has a lot of oil off shore, so drilling companies, or companies that supply drilling equipment, might benefit.

Cuba should have already been a mega paradise resort island, like Hawaii or back in the 50s. They should have been self-sufficient. They can grow food 12 months out of the year, but they need to import 80% of their food. They could have set up factories to supply their excess labor to the world, but they have failed in that regard.

So, I would look for the benefits of any US thaw to be to the Cuban Government. The Cuban government will be able to provide more to the people, at the expense of any businesses that set up there. And the Cuban people will see their government as their benefactors and they will be grateful to Castro family for the privilege of being able to eat.
+ 1 on both of those comments.

To the OP, yes I believe there will be some stock plays out there but it's going to be difficult for me to determine when they will exhibit themselves - probably a year or more from now although there will possibly be some "pop" in cruise line, air lines prior to that.

I have friends and family that lived in Cuba many years ago. My mother and father visited the island back in the 30's and 40's. It could have been so much more than its current self. Hopefully it can be resurrected in a thoughtful, methodical manner and not find itself with too much glitz and insufficient on substance.
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Old 12-21-2014, 12:44 PM   #17
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I was watching an on location news bite from Cuba and saw more 1950s American cars drive by in that 3 minute segment than I have in the past 30 years here. I thought island weather was tough on metal. It is amazing how they could keep those cars operational as these were not restored ones!


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It is amazing what you can do to keep a 55,56 or 57 Chevy running. Nothing high tech and easy to work on. Jay Leno, once said all's you needed to keep them running was a hammer.
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Old 12-23-2014, 01:22 PM   #18
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With the coming thawing of relations with Cuba and the US, what are the possible stock plays that you might foresee?

Cellular, cruise lines, autos Your thoughts??

First thing that comes to mind is Altria needs to sell Cuban cigars in the US market.

Probably much easier to bring Cuban goods to the US than vice versa for a long time.

Eventually though I could see a lot of what you suggest, for example AT&T in Cuba (if directv deal goes through they will have 18 million customers in Mexico and they just bought 3rd largest Mexico wireless company). So I could see them getting into the Cuban market.

My guess is it will be at least 10+ years for Cuban market to open up.
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Old 01-02-2015, 01:07 PM   #19
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Yawn. Nothing significant.

Tiny market. 11m people is less than half the size of a tier 2 city like chongqing in china. Little income. Small market to sell to.

Almost No base infrastructure and little experience building infrastructure and a communist economic bend to business which, like eastern europe in 1989 or china in 1976... will take a generation once truly open to change toward capitalistic characteristics.

Tourism. Cigars. Casinos. Rum. Seems like an oppy to play "sin stocks" but way way way too early.. if ever.
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