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When I first started buying shares last November of inverter-manufacturer Power-One (Nasdaq: PWER) for my Messed-Up Expectation portfolio, a whopping 32% of the float was sold short. This reflected the market's fear that the European Union, and Germany especially, would not be adding a lot of solar power capacity. That, in turn, would cut demand for Power-One's inverters, which change solar panels' and wind farms' DC electricity into the AC that power grids use.

That grim scenario has pretty much played out. In the third quarter of last year, Power-One shipped 867 MW of inverters, bringing in $228 million. These numbers climbed to $263 million and 932 MW in Q4, before plunging to $152 million and 609 MW in the first quarter.

But in the second quarter, Power-One's downward slide reversed, as the company increased shipments to 718 MW for $180 million by expanding its presence and shipments in North America and Asia. It built a new manufacturing facility in Arizona and started manufacturing inverters in China. Power-One expects to supplant any decline in Europe with growth in China, India, and North America.

Both Power-One and SMA Solar -- the global leader in inverter shipments, just ahead of Power-One -- see a huge opportunity in India. The country plans to develop 1 GW of solar power by 2013 and increase that to 20 GW by 2022. China is expected to reach 2 GW of solar power by the end of this year, and by 2015, its solar power could be no more expensive than that generated by coal.

The market seems to have recognized this shift away from Europe in global solar demand. The number of shares of Power-One sold short has dropped by 50% since the end of last year. Several other solar-related companies have either seen their short interest remain fairly steady or drop over the same time period.


Short interest, Dec. 31 2010

Short interest, Aug. 31, 2011

Power-One 38.2 19.3
Advanced Energy Industries (Nasdaq: AEIS) 2.2 3.0
First Solar (Nasdaq: FSLR) 16.4 16.9
JA Solar (Nasdaq: JASO) 24.2 12.9
Sunpower (Nasdaq: SPWRA) 13.6 7.9
Suntech Power (NYSE: STP) 18.8 19.3
Yingli Green Energy (NYSE: YGE) 12.6 14.6

Source: Capital IQ, a division of Standard & Poor's. Short interest is millions of shares sold short as of the given date.

Obviously, a drop in the short interest is not reason enough to buy shares of a company. However, Power-One's move away from Europe as the primary supporter of inverter sales will only become greater as China, India, and even the U.S. increase use of solar energy to supply electricity to their populations. Power-One is well positioned for that road.

The fears associated with European macroeconomic worries are creating quite a headwind for Power-One and holding the share price down, but as I plan to hold shares for several years, I believe this is actually creating an opportunity for us to get shares more cheaply than otherwise. Tomorrow, the MUE port will purchase another allotment of shares of Power-One.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.