5 Ways to Profit From Obama's Cuba Announcement

By Janet Alvarez on 11 March 2015 0 comments

The historic executive order issued by President Obama heralds a new era of eased relations between the United States and Cuba. After over 50 years of iciness between the two neighbors, Obama's order establishes official diplomatic ties, reduces some travel and financial restrictions, and paves the way for greater humanitarian support, as well as trade in some areas, such as communications equipment.

While the executive order still doesn't mean all Americans can travel to Cuba for tourism or bring back as many Cuban cigars as they'd like, it does pave the way for stronger economic and social ties between the two countries. Even better, there are a few simple ways you can profit from this historic accord. Read on to learn five ways the Cuba announcement can boost your pocketbook.

1. Consider Travel Stocks

At just 90 miles from the U.S., Cuba was an American tourism hotspot before the embargo, and remains a top travel destination for many Canadians and Europeans. That's why easing of restrictions to the island nation is likely a boon for travel companies. Cruise lines such as Carnival Cruises and Royal Caribbean have rallied on the news, seeing their stock prices boosted in anticipation of liberalized travel restrictions. Keep in mind, however, that this executive order is not a lifting of the Cuban embargo — that's up to Congress. American tourism to Cuba would be limited until such a time, so assess travel stocks accordingly. 

2. Buy Into a Caribbean ETF or Fund

Today's historic announcement triggered a spike in the Hertzfeld Caribbean Basin Fund (CUBA), a fund which invests in companies throughout the Caribbean, including Cuba. Its price was up over 30% in intraday trading. Consider investing in ETFs or mutual funds with exposure to the island nation's businesses.

3. Look at Wire Transfer and Remittance Companies

The executive order increases the amount Americans may send in remittances to Cuba to $2000 per quarter, up from $500 today. That'll mean brisk business for remittance and wire transfer companies such as Western Union. Its stock was up nearly 4% in intraday trading on the news.

4. Consider Credit Card Companies and Banks

The new rules will also be to the benefit of many financial services companies, since it'll now enable American debit and credit cards to be used on the island. That could be a boost to credit card companies and card processing services. Shares of VISA and American Express also saw gains.

5. Consider Telecommunications

An authoritarian regime, Cuba has long been plagued by controls on its communications technologies which have been exacerbated by the embargo. The new executive order promises improved access to American telecommunications and Internet technology imports. That means stock of companies such as Verizon could see a boost. And when combined with further easing on travel to Cuba for import/export reasons, it means Americans involved in trade of communications products and devices may see improved business as a result.

To be sure, there is no guarantee all of the executive order will be implemented easily, nor that any of these investments will bear significant returns. Already, some Republican lawmakers have expressed frustration with Obama's executive order, creating a potential Congressional showdown and hampering the likelihood of repealing the embargo. Still, this remains a historic opportunity to get in early on what may be one of the biggest investment stories of the next few years.

Will you make changes to your portfolio to profit from normalization of relations between the United States and Cuba?

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