They take advantage of this to create short squeezes and dump some at high prices, then wait for new retail shorts to pile on and repeat the cycle. Without deep pockets, retail shorts will lose big. If you want to short on fundamentals, look at BBY with dying business model going the way of Circuit City
I think you are right about best buy, but Netflix is probably only 1-2 years behind. I just can't see the rest of the world sitting on it's hands and letting Netflix do all the video streaming. There are just too many potential competitors. I'm short at 186, 204, and 213 in equal amounts of pain right now. But who can guess the top of this bubble?
You might be right about NFLX being overpriced and competitions will dethrone it sooner than one might expect, but with low float and big traders creating extreme volatility, the little guys can't really win easily unless they do only intra-day trading with tight stops or being able to pick at/near intermediate inflection points. I am talking about both stocks and options, by the way.
For shorts based on fundamentals, besides BBY, I would keep an eye on these likely Chinese scams: DEER, CCME, and especially -> EBIX <-