Political Punch: By George!
11/28/2003 12:00 am EST
Neil George is known for his no-holds barred approach in his By George! newsletter. He often takes on politically-charged issues, offering an in-depth look at the investment ramifications of controversial topics. The focus of his latest issues are no exception - Cuba and steel tariffs.
"Washington has just shut down another push to open up US tourism in Cuba. In the meantime, Europeans and Canadians continue to develop Cuba's economy and are becoming ever more successful at it. As a result of projects that run the gamut from leisure to industrial ventures and even high-tech biological and health deals, when we finally do decide to let economic freedom take hold in Cuba, there will be some market victors. The long-haul bet on the market's eventual opening is Leisure Canada (CA:LCN Toronto). This company controls key properties in Havana and around the rest of Cuba that are some of the most prime for business and tourism development. The company is already on board and at the ready to ramp up development as soon as Congress does the right thing. And even the Professional Golf Association (PGA) is there, with golf course development and tour events at the ready - all part of Leisure Canada. But the company won't be a winner until the change occurs. So think of it as a long, long-term option or warrant on the Cuban reformation and try to buy at least a few shares that still trade for pennies. It's pure speculation on what eventually has to happen: Cuba Libre!
"Meanwhile, here's a pitch for steel - cold, hard steel. We expect we're going to have to scrap the steel tariffs. From where I sit, the US will benefit more by the elimination than the imposition of the tariff. My favorite is Pohang Iron and Steel, now known as Posco (PKX NYSE). It's one of the more profitable of the steel makers. Even with the US tariffs, it has bolstered sales by nearly 5%. Posco continues to deliver positive and impressive returns for shareholders. It even pays the shareholders with a nice dividend for an old-line industry of nearly 3%. Finally, it's cheap; the shares still trade at a discount to trailing sales. Adding to the case is the move to expand shipbuilding in the region and beyond. From war craft to expanded production of double-hulled petrol tankers and liquefied natural gas container ships, Posco is front and center, ready to provide steel for the big shipbuilding initiatives. Then there's the newly emerging demand by the big shipping companies for the super cargo and container ships. All of this means more steel, and no one is in a better position to reap the benefits than Posco. So, it might not be whiz-bang or high-tech, but Posco is perhaps something to be positive about."