After a terrible year in 2011 solar stocks are still grappling with low average selling prices and trying to stay afloat. The slashing of government subsidies in Europe has reduced or eliminated profit margins for many solar companies. Of course, this has been great news for solar bears. Those who predicted this collapse and sold short have profited significantly. This trend seems to now be coming to an end as short ratios are starting to decline.
Let’s look at the 10 most-shorted solar stocks, based on the number of shares held short divided by total shares outstanding, along with the estimated number of days to cover:
Company | Ticker | Short Interest | % of Shares | Day to Cover |
(in mil. of shares) | Outstanding | |||
1. LDK Solar | 26.5 | 25.1% | 11.7 | |
2. Energy Conversion Devices | 11.8 | 22.2% | 11.5 | |
3. Trina Solar | 16.3 | 22.2% | 10.9 | |
4. First Solar | 18.7 | 21.6% | 4.2 | |
5. Suntech Power Holdings | 17 | 13.1% | 8.4 | |
6. Yingli Green Energy | 13.6 | 12.5% | 8 | |
7. GT Advanced Technologies | 14.7 | 11.6% | 9 | |
8. Canadian Solar | 4.2 | 9.7% | 4.7 | |
9. SunPower Corp. | 6.2 | 6.2% | 4.3 | |
10. JA Solar | 9.7 | 5.7% | 3.4 | |
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As shown in my previous analysis, short ratios for most solars have declined significantly since October 2011. The most significant change in short interest was GT Advanced Technologies sliding down to #7 on the list, going from 24.5 million shares held short to 14.7 million. Also, JA Solar has now made the top-10 list coming in at #10.
As a reminder, short interest may be useful in judging investor sentiment for a particular stock from month to month, and as a comparison with other shorted stocks. This indicator is useful for both bears and bulls – bulls may consider a high-short-interest ratio a positive, since eventually there would be upward pressure on the stock’s price as short sellers cover their short positions. This upward pressure can become very strong if, for instance, a company announces some positive news and forces a number of short sellers to cover at the same time. The days-to-cover statistic is defined as the number of shares sold short divided by average daily volume.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
