The Johnny Depp of Closed-End Funds Talks CUBA (part 7)
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Closed-end fund guru Tom Herzfeld discusses Cuba and his most popular fund, the Herzfeld Caribbean Basin Fund (NASDAQ: CUBA).
[Continued from part 6]
Nick Slepko: Do you have any investments in Cuban-American public companies?
Tom Herzfeld: Cuban-American or not, Mastec (NYSE: MTZ) is a great company by most metrics. The company’s founder Jorge Mas Canosa was a very prominent Cuban-American leader…Mastec was one of our earlier holdings. I always had a high regard for the family and though I never met Jorge Mas personally, people in the community always spoke of him highly. Also, I thought the company was well-positioned in infrastructure.
His son [Jose Mas] now runs the company and he seemed to hold the company together well when they went through a rough period a few years ago with bad earnings and financials that weren’t all that great, but it’s a cyclical company and I am very optimistic about their future.
I cannot help but believe that they will be involved in rebuilding a Free Cuba.
Slepko: I heard rumors that they were involved in some aspects of the Venezuela-Cuba fiber optic line. Is that true? Do you think they’ll be able to snag the estimated $40 million Gitmo to Miami cable that the Pentagon is considering?
Herzfeld: There was nothing official from the company, but they do have the ability and technology to do a project like that.
…
Slepko: Why do you have Wal-Mart Mexico (NASDAQOTH: WMMVY.PK) and Kimberly-Clark Mexico (BMV KIMBERA) in the Fund, but not Wal-Mart (NYSE WMT) or Kimberly-Clark (NYSE KMB)?
Herzfeld: Geographically they are the subsidiaries active in the Caribbean Basin. We added to Wal-Mart Mexico when the stock got hit after the bribery scandal came out. It was a good buying opportunity.
Slepko: So did you go with Wal-Mart Mexico because they have good metrics or because they know how to “do business” in the Caribbean?
Herzfeld: No, I bought them because they are a good company and they are in the Caribbean and I bought them on bad news. Wal-Mart Mexico continues to grow throughout Central America with various market brands such as La Colonia brand in Honduras, Nicaragua, and Guatemala, as well as Pali brand in Nicaragua.
Slepko: You have more PriceSmart (NASDAQ: PSMT) than you do Wal-Mart Mexico. Why is that?
Herzfeld: I just like their business and it’s ironic that it was one of those businesses I didn’t know existed until I read about them in Barron’s. It’s funny how you sometimes get something right out of the newspaper. We started looking at them and they had a lot of potential and they were all over the region. They continue to expand aggressively in Central America and the Caribbean. Indications are they would move into Cuba if given the opportunity.
Slepko: Costco (NASDAQ COST) has said they have no interest in a place like the Caribbean, but the islands are home to more people than California and PriceSmart appears to have located their stores in the denser pockets around the Basin.
Herzfeld: PriceSmart is a great business for the region…I don’t know if PriceSmart will outperform Wal-Mart in the region, but does it matter as long as they both make money?
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Slepko: Tell me about the Fund’s banking and finance picks.
Herzfeld: With all of our larger positions, there is something in our reasoning that is definitely Cuba-related – although Bancolombia (NYSE: CIB) might be a bit of a stretch, but as a Caribbean fund we want to be in Colombia. With Bancolombia, we know a lot of Colombians here in Florida, and Colombian businessmen and businesswomen who knew the company very well, recommended it highly.
Panama’s Bladex (NYSE BLX) is also a great way to be involved in the region – and it made a new high while we were talking.
As for the Puerto Rican banks [like Popular (NASDAQ BPOP)], they were, well, mistakes I guess. We bought them when they were way down, and they got worse. On the up side, we didn’t ride them down from the top, we got them when they were in distress. It happens like that sometimes.
[Continued in part 8]
Nick Slepko has no position in any company mentioned here at the time of publication. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend PriceSmart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
