Castro Resigns: Investors Jump the Gun?


Fidel Castro stepped down this morning as president of Cuba. His announcement comes a few days before Cuba's national assembly will meet to select a new head of state, most likely his brother, Raúl Castro.

Upon hearing this news, investors frantically started buying the Herzfeld Caribbean Basin Fund, with its conveniently alluring stock ticker, CUBA. As of the writing of this post, the stock is up about 21%! CUBA is a closed-end fund that invests in companies from the Caribbean basin and the U.S. CNBC thinks this fund is "likely to benefit from the economic, political, structural and technological developments in the countries within the Caribbean Basin including Cuba," among others.

But its investments include a paltry $16 million of assets, about $1 million of which are U.S. treasuries, and most are small bets under $500K. It's major investments include Consolidated Water (CWCO) at about $1.3 million and Seabord Corporation (SEB), at about $1.5 million. With about a quarter of CUBA's investments in only three securities, why not just buy the stocks themselves? They're all up today, too, but far less than 21%.

Also, Fidel stepping down doesn't really mean much will change in the short term. Fidel said that he is "not saying goodbye” and that he would continue "to fight as a soldier of ideas.” That means he may continue to wield influence in his brother's government as long as he's alive and able. Some people think Raúl Castro might be willing to try the Chinese example of state-sponsored capitalism, but such change is probably not likely as long as Fidel is around.