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 Herzfeld Caribbean Basin Fund (CUBA-OTC)
If you ever get the chance to travel to Cuba, I strongly recommend you go. Vintage 50's cars zoom down ancient streets... no McDonald's and Starbucks hegemony on every corner... beautiful women everywhere, walking to the rhythms of omnipresent street music...
The lives of ordinary Cubans are miserable. The riches of the island country are only available to Castro's elite. Government informers lurk behind every Spanish faÁade. But Castro has built up an amazing infrastructure of roads, telephones, and hospitals. Someday, Castro will die. (As the Hammer pointed out, Castro's diet of cigars and ideological fervor would be straining to any man...)
The U.S. Cuban embargo is a joke. 40 years is enough time to experiment with unilateral embargoes. The embargo only succeeds in cementing Castro's total grip on Cuban society. If Cuba were flooded with American capital and hyperculture, Castro's regime would collapse.
Once the embargo is lifted, the hidden strengths of Cuba will be reflected in explosive economic growth. In twenty years, Cuba will the economic powerhouse of Central America. There's a lot of money to be made in Cuba.
The Herzfeld Caribbean Basin Fund (CUBA-OTC) is the only play on Cuba listed on a U.S. stock exchange. CUBA's assets are creatively structured to benefit indirectly from the potential listing of the U.S. embargo. CUBA's discount/premium to Net Asset Value (NAV) tends to expand and contract with the perceived state of U.S./Cuban relations.
Currently, CUBA is trading at an 11% discount to NAV. This discount is unwarranted. In my view, CUBA should trade at a premium to NAV. Salomon Smith Barney recently initiated coverage with a "Outperform."
I continue to rate CUBA as a Strong Buy.
 Xoma (XOMA-NASDAQ)
Despite the low share price, Xoma (XOMA-NASDAQ) remains vulnerable to further selling. If Xoma needs to raise money before the flow of news turns positive, it will be punitively dilutive to shareholders. However, it would be a mistake to panic, given the pessimism built into the market.
There are a number of possible scenarios: (1) Neuprex does not work, (2) Neuprex works, but it is impossible to demonstrate efficacy in broad, systemic, septic-related diseases, (3) the Phase III trauma trial was structured incorrectly. I doubt that XOMA is an outright scam. Why would Genentech, a premier biotech company, partner with XOMA to develop hu1124, a commercially promising drug?
The most likely scenarios are (2) or (3). (2) would the most painful conclusion, since it would mean that CEO Jack Costello has squandered capital on worthless trials. (3) would be the best scenario for shareholders, since it would mean that the bad Phase III results were an anomaly. We will find out soon enough, following the review of the unblinded and analyzed Phase III data from the Meningococcemia trial. If the results are good, XOMA will file a BLA with the FDA-and the stock will immediately recover to US$5-8. On the other hand, if the results are bad, XOMA could decline to US$1 in a bad market.
XOMA has survived bad times before. While there is risk of significant dilution and further disappointment, most of the bad news has been factored into the stock. XOMA's technology is still a potential commercial goldmine. My eighteen-month target is US$15 (assuming that Neuprex is approved for Meningococcemia). It makes sense for contrarian speculators to ride out the current volatility.
Please read on...
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