3. Venezuelan President Hugo Chávez may be on his deathbed

The big wild card in all this is Venezuelan President Hugo Chávez, who may be rapidly losing his fight against cancer. Here's why his demise could lead to an end to the embargo.

Chávez has an unusually close personal and ideological relationship with Fidel Castro that goes back many years. This explains why Venezuela subsidizes the Cuban economy to the tune of about $8 billion worth of oil a year. It's not clear that whoever succeeds Chávez would continue the oil subsidy. Without it, says Roett, the Cuban economy would tank and a social crisis would ensue.

That might either force out the Castro brothers or pressure them to pass the torch and make the political and economic reforms needed for the U.S. to lift its embargo and possibly lend the economic aid that would avert chaos.

"Change will only come when the octogenarians who are running Cuba today have no choice but to open up in a meaningful way," says Roger Noriega, a former assistant secretary of state for Western Hemisphere affairs who now directs Latin American studies at the American Enterprise Institute. "They've only adopted reform when they were under pressure." An end to the Venezuelan oil subsidy and ensuing economic problems might create that kind of pressure.

Helms-Burton calls for the U.S. to support any transitional reform government. Thus, Cuban domestic reform might attract U.S. aid  that could be needed to avoid economic and social chaos if Venezuela pulls away after Chávez.

If the embargo goes away and Cuba transitions toward a market economy, these companies could benefit, maintains Herzfeld.

Consumer plays

Cruise line companies Carnival and Royal Caribbean Cruises (RCL) would benefit from an end to the embargo, since they'd have a whole new market. Cruises to Cuba would be a popular way for turistas to see the country, out of necessity, since hotels are in a poor state in Cuba. "If the embargo were lifted, their Caribbean business would double," says Herzfeld.

Michael Scanlon, an analyst with the John Hancock Balanced (SVBAX) fund, likes Carnival in part because it looks cheap. A key valuation  metric here is enterprise value (market cap plus net debt) per "available berth per day," or the number of available beds per day. It is currently at $535, compared with almost $1,000 in 2006. Scanlon believes ticket pricing should improve because cruise companies are limiting capacity expansion over the next few years. And a lot more boomers, a key cruise demographic, are moving into retirement.

Copa, a Panama-based regional airline serving Cuba, would benefit from an upturn in travel from the United States. The carrier already stands to gain from Cuba's recent loosening of travel restrictions on its citizens, says Herzfeld. "This is a very major change in policy," he says. This reform will help Copa even if the embargo is not lifted, because Cubans will be traveling more throughout the region.

Coca-Cola Femsa would see a lift in business in Cuba, as the distributor of Coca-Cola in Central and Latin America, though you can already buy Coca-Cola in Cuba.

Transport plays

Seaboard is the largest container carrier in the Caribbean, so it would benefit from greater U.S. trade with Cuba and a revitalization of Cuba's economy, says Herzfeld. He also expects gains for the Norfolk Southern (NSC), railroad. "We believe a lot of freight for Cuba that comes down the East Coast to Florida will be shipped on their railroads."

Infrastructure plays

"If the embargo with Cuba is lifted, there will be boom in Cuban infrastructure development," says Herzfeld. This could help MasTec (MTZ), a Florida infrastructure construction and engineering company. It would also help Vulcan Materials (VMC) and Martin Marietta Materials (MLM), which sell granite, limestone, sand, gravel and cement used in construction, and Watsco, which sells air conditioners. Florida-based homebuilder Lennar (LEN), would also pick up business in Cuba, he predicts.

Herzfeld Caribbean Basin Fund

You could also buy shares of the Herzfeld Caribbean Basin Fund, which Herzfeld has positioned to benefit from an end to the embargo. This is a closed-end fund, a kind of investment company that raises investment capital and then issues a fixed number of shares. The shares then trade throughout the day like stocks, moving up or down as the value of the fund's holdings change.

Herzfeld's fund looks cheap, because it currently trades at about a 7% discount to its net asset value, or the value of the stocks it owns. The NAV is currently around $9 per share, says Herzfeld. But the fund shares sell for around $8.38. The fund has historically been sensitive to Cuba-related news, and at some point almost every year, it rises above its net asset value.

"The holdings will continue to do well, even if nothing changes in U.S.-Cuban relations," predicts Herzfeld. "If the embargo is lifted, they will get a significant amount of new business." Herzfeld and his family are the fund's biggest shareholders. This fund's stock is up by an annualized 16% a year over the past 10 years.

Of course, betting on an end of the embargo assumes that Cubans still have enough entrepreneurial spirit -- after 50-plus years of living in a government-run economy -- to create and run businesses vigorously enough to make an economy hum. 

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"It is going to be extremely hard for Cubans to leave that mentality of depending on the government and take chances," says Hidalgo. But he thinks it would happen. After all, he says, Cuba was one of the most developed Latin American countries when Castro took over, and the culture behind that achievement is not totally gone. "You still see a lot of underground economic activity, which means that the capitalist spirit is there," says Hidalgo. "The communist regime has not erased that capitalist spirit."

At the time of publication, Michael Brush did not own or control shares of any company or fund mentioned in this column.

Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.