Solar power conclave in Los Angeles

The world today is one where a child can be born in a solar hospital, get their education in a solar school and get married in a solar heated church, said the CEO of the solar trade association at the Solar Power International conference in Los Angeles this week. 27,000 have registered to attend – how many of them are hedge fund analysts trying to glean the inside story in this hot sector?

Here is a summary of the status of solar from day 1 of this event: The mood was upbeat and the outlook positive with some visibility into the next few quarters of strong growth and continued sold-out factories for the next quarter or three. Forecasts are a bit murkier further out than that, with massive capacity coming on-line, continuing uncertainty over the German feed-in tariff, and the usual lack of knowledge about what the U.S. Congress might do, if anything. Module prices are expected to continue to fall over the next quarter.

So one would imagine that investors are shorting this sector in the short term while being careful of the Chinese solar companies given their recent government cash boost? This is broadly the case.

Yingli Green Energy Holdings (YGE) is a solar firm with Chinese government money in its warchest. They declare themselves on track for about a 10% share of the US solar modules market within a year. Short sellers rapidly closed a large position from 16% to 6% between June and July. Was this profit taking since with the price hitting a 52-week low in June or on rumors that the Chinese government was about to step in and give YGE lots of money? We will never know. Short interest has held steady since then.

Another China located solar player is Suntech Power Holding Adr (STP). They became a successful global player in the industry in just 10 years. It has recently announced production at its first US manufacturing plant. As with YGE, one would imagine there would be short covering? Alas no! Short interest has been building up since August from 5% to 10%. However, funds who lend have also been increasing their positions in this time from 10 million to 13 million so there are diverging views of their future.

Two other Chinese companies include Solarfun Power Holding Adr (SOLF) and China Sunenergy Adr (CSUN). Solarfun Power which sees short interest increase from 4% to 6% over the past month as the share price holds steady close to its recent 52-week high. China Sunenergy sees short covering since September lowering short interest to 12%.

Meanwhile, did the short sellers turn negative on the US solar companies when the Chinese government announced its plans to invest in their solar industry in June? Not really! There was significant short covering from 30% of total shares to 20% in Sunpower Corp (SPWRA) between June and September. However, this has now been reversed as we see 23% of stock on loan. First Solar (FSLR) saw a little bit of short covering between June and August but has risen in September. Short interest currently stands at 16%, levels observed in June.

Other US solar stocks seeing an uptick in short interest include Fluor Corp (FLR) which has seen short interest rising since June, currently standing at 5%. STR Holdings Inc (STRI) has caught the attention of short sellers over the last 6 months, with short interest climbing to 15%.