By Tyler Percival From Seeking Alpha

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Summary

The United States and Cuba have begun to re-establish a relationship.
There are many opportunities to profit from renewed relations.
Cuba has begun to focus on private enterprise.
The President has made an effort to mend relations with previously outcast Cuba over the past few months. Both countries re-opened their respective embassies and restrictions are being eased. While a full lift of the trade embargo placed on Cuba is still a ways off, there has been great improvement and with it, great opportunity. Cuba has also made plans to allow somewhere around 1 million American tourists, supplementing its some 3 million tourists from other nations across the globe.

To supplement this projected increase in cash flow, due purely to the easing of restrictions, the Cuban government has placed its focus behind private enterprise and business in Cuba with various reforms in an attempt to spur the economy. The coupling of increased cash flow from a developed nation such as the U.S. and a large scale push towards private enterprise and investment within the country already in motion, Cuba has the potential to see a spike in their economy and make a name for itself as a newly emerging market.

There are a few key ways to profit from the situation in Cuba, all having some level of risk as many foreign emerging investments would. The first way to position a portfolio through an ETF with a portion of Cuban investment built in. A great option for this is the Herzfeld Caribbean Basin Fund (NASDAQ:CUBA), an ETF with plans for a large investment in Cuba. This option is an easy way to diversify quickly, with holdings in a number of companies that have the potential to benefit from a better economy and the emergence of a private sector in Cuba.

For example, its investment in Seaboard Corp. (NYSEMKT:SEB), a company with a variety of services from ocean transporting to sugar processing, has the potential to see large returns as the Cuban economy increases. This is due to the fact that Cuba will need to import many of its resources, while also processing one of its largest resources, sugar. SEB is a multifaceted holding that is beneficial to the Cuban project on various fronts.

Another holding that could see business from a growth in Cuban economy is the infrastructure company MasTec (NYSE:MTZ). As with any growing economy, there will be a need for an improvement in infrastructure in Cuba, and opportunity for MasTec to reap the benefits of these projects. The Herzfeld Caribbean Basin Fund is a great opportunity to begin investing and diversifying with limited risk in the very new and exciting Cuba.

Another way to enter into Cuban investment is cruise stocks, such as Royal Caribbean Cruises (NYSE:RCL) and Carnival Corp. (NYSE:CCL). With Cuba as a new possible destination, Americans who were never able to visit before could flock to check out the once forbidden fruit. With only a 90-mile voyage from the states, Cuba could become a new and popular stop for many Caribbean cruises. Also, due to no American tourism for the past half a century, hotels and resorts are not as prominent in Cuba as on other Caribbean islands, leading to a necessity to visit, at least temporarily, by ship. This leads to the next possible investment strategy to position a portfolio to take advantage of the impending growth in Cuba, hotels.

With the growing possibility of a large-scale increase in Cuban tourism from the United States, hotels and resorts could begin to surface along the beautiful Caribbean shores of the island. Cuba is one of the closest Caribbean islands in relation to the U.S., and shows great potential to be a popular destination, due not only to its proximity and beauty, but also due to the fact that no U.S. citizen has visited in over 50 years.

This sentiment alone could lead to a great migration of vacationers who want to see the once proscribed island. There are a few hotel and resort stocks that could be in a position to profit from a tourism surge in Cuba, the first of which is a predictable choice, Hilton Worldwide (NYSE:HLT). A company with such a large range of brands would be expected to make a play at expanding its market into Cuba, and could see great success as consumers know the name and feel comfortable in a foreign land staying in a hotel or resort they are familiar with.

It would not be surprising to see a Cuban tourist resort open under the Hilton Grand Vacations brand, owned by Hilton Worldwide. Another hotel and leisure stock choice, possibly slightly more risky but possibly more rewarding, is MGM Resorts International (NYSE:MGM). This would be a more speculative pick, but if there is interest in Cuba from MGM, it could be a very strong and promising market for them. About five decades ago, Havana was to Cuba what Las Vegas is to the U.S. now, and MGM has the reins on Vegas.

If Havana were to be an investment project for the resort and casino giant, it could be seen as a new destination for people around the world. A Vegas in the beautiful Caribbean, of sorts. The profits from such an investment have very high ceilings that is if all goes according to speculation. Hotel stocks are the hardest to predict in the Cuban situation, as many things could stall investment, from politics to a lack of tourist interest. On the flip side, it is the industry that could stand to profit the most from renewed relations between Cuba and the U.S.

There is very limited predictability of the situation in Cuba, both politically and financially, but also great opportunity for investors who can stomach some risk. If restrictions with the U.S. in tourism and trade start to ease, and Cuba continues to nurture business and enterprise in its growing economy, investment in the island will be an exceptional path to portfolio diversification and growth. It will be interesting to see how the situation plays out over the next few years.

For more on this story go to: http://seekingalpha.com/article/3358595-u-s-and-cuba-profiting-from-the-rekindled-relationship
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