Hedge fund managers who like to short overvalued stocks have their sights set on Netflix (NFLX).

Netflix

Whitney Tilson of T2 Partners makes the case in his article Why We’re Short Netflix, pointing out the company’s lofty valuation and competitive vulnerabilities.

Tilson is in good company.  As of November 30, there were 11.13 million shares sold short.  That’s 22% of the stock’s 50 million share float, making it one of the most heavily shorted stocks.

If the shorts are right, vulnerable ETFs include the PowerShares Nasdaq Internet Portfolio (PNQI) which has 4.6% of the portfolio allocated to NFLX as of December 16, 2010.