Investors Hated the Cuba Fund That's Now Going Parabolic

But that could change in a hurry.
Photographer: Andrew Harrer/Bloomberg

The Cuba-linked closed-end mutual fund that's going bananas in the wake of Fidel Castro's death is a product investors had grown increasingly sour on over the past six months.

The Herzfeld Caribbean Basin Fund (CUBA) was up as much as 17 percent on Monday morning, its best one-day showing since December 2014, amid hopes that the dictator's passing will herald profit-making opportunities for a number of firms that operate there, mostly in the businesses of tourism and infrastructure development.

As of Friday, the fund traded at a sizable discount to its net asset value — nearly 15 percent — as it has since early May of this year. That's its steepest discount since December 2012. But if recent history is any guide, that could be changing in short order.

After President Barack Obama moved to open up relations with Cuba in late 2014, the fund flipped from trading at a discount of more than 12 percent to its net asset value to a premium of 70 percent in one week. The fund continued to trade at a premium to its net asset value until early 2016.

CUBA NAV
Source: Bloomberg

The fund's largest holding, as of June 20, is Florida-based infrastructure company MasTec Inc., which has long had ties to the Caribbean island nation. The first half of the firm's name comes from the late Jorge Mas Canosa, who — after being exiled from Cuba in light of his vocal opposition to the Castro regime — founded the Cuban American National Foundation. His son, Jose Ramon Mas, is MasTec's CEO and also the Chairman of the Board for the foundation, which aims to "bring freedom, and democracy, and respect for human rights to Cuba."

Other top holdings include firms linked to tourism, either directly — as is the case with Royal Caribbean Cruises Ltd., Norwegian Cruise Line Holdings, and Carnival Corp. — or more indirectly, such as Copa Holdings SA, whose subsidiary offers international flights to and from the island.

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