Will stock investors ever profit from a more open Cuba?

Cuba once had a stock market, the La Bolsa de Valores de la Habana, which lasted from the 1920s until 1959, when the Cuban revolution ended private ownership in the country. The Havana exchange was, in fact, one of the largest stock exchanges in Latin America.

Now, as President Obama moves the U.S. closer to ending the 60-year-old trade embargo with Cuba, this former market history for the communist island begs the question: Will Cuba ever list a domestic stock again?

Don't answer no too quickly.

Tourists take in the sites from a tour bus in Havana, Feb. 28, 2015.
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Tourists take in the sites from a tour bus in Havana, Feb. 28, 2015.

The establishment of a Cuban stock exchange could happen in the next three to five years, said Tom Herzfeld, chairman and president of Miami-based Thomas J. Herzfeld Advisors, a closed-end fund firm that has specialized in Caribbean stock investing since the 1990s—it runs the Caribbean Basin Fund (CUBA), which launched in 1993. That fund was designed to invest regardless of the Cuban embargo and with a focus on companies that do business in the region, including cruise ship operator Carnival, Panama-based airline company Copa Holdings, and Birmingham, Alabama-based construction materials company Vulcan Materials.

Carnival and other U.S. companies targeting a more open Cuba have been the business story since President Obama met and shook hands with Cuban president Raul Castro last month at the Summit of the Americas. It's been a narrative about getting into Cuba, rather than what could develop as a Cuban domestic economic story and be exported. But if the embargo is lifted, "the entire country of Cuba will need to be rebuilt, and there will be investment opportunities across all these industries," Herzfeld said. And the resurrection of a Cuban stock market could occur faster than many people think, he said, with a big "if."

"What is needed is the political decision of the Cuban government and the end of the U.S. embargo," Herzfeld said. "Everything else can be solved without major difficulties."

US to start talks with Cuba to normalize full diplomatic relations: AP

The Helms-Burton Act, officially called The Cuban Liberty and Democratic Solidarity Act of 1996, extended the territorial application of the initial embargo to apply to foreign companies trading with Cuba.

Tropical medicine

For the time being, the most direct way for stock investors to get a piece of the emerging Cuba story is to buy listed companies that have, or plan on forming, joint ventures within the country.

One company, though no longer publicly traded, that shows the model is YM BioSciences. In 1994 the Canadian drug developer, which was listed on the Toronto Stock Exchange and the New York Stock Exchange, formed a joint venture with Cuba's Centro de Inmunología Molecular (CCIMAB), called CIMYM BioSciences. The venture was 80 percent owned by YM BioSciences and 20 percent owned by the Cuban government and went on to develop the cancer drug nimotuzumab. This venture didn't lead to a blockbuster drug. In December 2012, YM sold its assets relating to that drug to InnoKeys PTE, a Singapore-based health-care company. In February 2013, YM was acquired by biotech giant Gilead Sciences, which has focused on other pipeline drugs with potential. But biotech remains one of the economic stories with the most potential within Cuba.

Abivax, a biotech company that invests in the development of vaccines and antiviral drugs and is largely owned by Truffle Capital, a Paris-based venture capital firm, started negotiating with Cuba in 2010. It is currently developing, with its partner the Cuban Centre for Genetic Engineering and Biotechnology (CGIB), a vaccine for the treatment of chronic hepatitis B.

Abivax CEO Dr. Hartmut Ehrlich said Cuba's biotech and health-care sector has potential because of its history of having to self-fund development of modern medicines. "Now they are in the position to look into partnerships via companies like Abivax or others or by themselves to export these products into more and more countries abroad," he said. "I believe this will become an area that will be of interest for retail investors from the point of view of potential growth."

Read MoreUS cancer center, software firm reach deals in Cuba

Herzfeld said the Cuban biotechnology industry has produced a remarkable array of products, from advanced vaccines to pharmaceuticals and diagnostic products. "The current set of drugs in development is robust," he said, adding, "Once the word gets out, a slew of interested investors will take note."

"They need everything. There is not an area they don't need, and now they have the ability to pay for it and want to buy it." -Jonathan Blue, chairman and managing director of Blue Equity

As sanctions against Cuba ease, there should be increased trade back and forth between Cuba, the U.S. and the rest of the world. Another area of value that Cuba has to offer the rest of the world is use of its shipping ports.

Brazilian construction company Odebrecht Infrastructure-Latin America has already been hard at work modernizing the Mariel Port, located 50 kilometers from Havana. The project was funded in large part by the Brazilian Development Bank, O Banco Nacional de Desenvolvimento Econômico e Social (BNDES) in association with the Cuban government. Investment in the project totaled close to $1 billion, with $682 million financed by Brazil and the remainder by Cuba. The Brazil-Cuba deep-water port project is projected to be the largest in the Caribbean and will aim to become a new hub for global trade and commerce, including a 180-square-mile development zone.

The Mariel Port is located in Cuba's free-trade zone, which was designed to attract international companies to Cuba by offering a low-tax, low-regulation environment. "With some sectors, such as health and bioscience, which Cuba lists as public human rights, there are restrictions on investment, but with other sectors, there is no restriction on Cuba ownership," said Oliver Hill, editor at Transactional Track Record, an online service that delivers intelligence and business opportunities in Spanish- and Portuguese-speaking countries.

Odebrecht Infrastructure will also complete the expansion of the international terminal at Havana's Jose Marti Airport.

Destination Cuba

Alongside the health sciences, Cuba's already growing tourism sector is the most obvious target for a market economy. The small country is already having trouble providing hotel rooms to the 3 million visitors it receives each year. Once more Americans are able to enter the country, the need for rooms and other amenities and services will only grow. "They need everything," said Jonathan Blue, chairman and managing director of Louisville, Kentucky-based Blue Equity, a private equity firm. "There is not an area they don't need, and now they have the ability to pay for it and want to buy it," he said.

Read MoreBefore you book: A look inside Cuba

Even Silicon Valley-backed lodging start-up Airbnb has moved into Cuba in a sizable way, with 1,000 listings in the country since last December.

Norwegian Cruise Lines already has plans in the works to bring curious tourists to Cuba on its luxury cruise liners if the embargo is lifted. The company wasted no time charting out an itinerary it will market to vacationers looking for a Cuba-focused cruise experience, said CEO Frank Del Rio at the recent Cuba Opportunity Summit in New York City.

Investors looking to make a buck in companies connected to Cuba should consider the leisure, gaming and lodging sectors. "Investment in those type of companies will be the quickest road to appreciation for the retail investor," Hill said.

The influx of tourists to Cuba also means more construction, from better roads to more accommodations and improved access to the Internet and telecom. Building materials, electrical components and heavy machinery will all need to be imported to Cuba, which is good news for the further development of the port. Currently, to get materials into Cuba and then distributed with virtually no logistics infrastructure other than for agriculture is a challenge. "They are starting from scratch," Blue said.

Cuba could also potentially become a competitive player in the sugar, nickel mining, fishery, tobacco and spirits sectors.

But Hill said, "It's a country of 11 million people, so I don't know if it will scale." He added, "I think it's going to be a long time before we see a Cuban stock market."

Herzfeld is more optimistic. His investment advisory firm has already created a private equity fund, the still dormant Cuba Fund, which will look to make direct investments in Cuba as soon as the embargo is lifted.

—By Leslie Kramer, special to CNBC.com