We recently crossed the half-way point for 2008 and so far this has been an incredibly bad year for internet stocks. Of the eight internet sectors that we cover, all eight are averaging negative returns for the year. The worst hit have been the small caps, internet content and e-commerce stocks which have all fallen by over 28% ytd.

Despite the dismal performance of the overall market, there have been a (small) handful of stocks that have posted decent gains this year. Of the almost 60 stocks in our internet coverage universe, five have posted gains of over 15% for the year. A quick scan of this list shows that investors seem to be on board with Chinese gaming stocks.

BIDZ.com (BIDZ)

BIDZ has posted a very envious 22% return for its investors this year. That is especially impressive when compared against the 39% drop in the share price of fellow jewelry reseller Blue Nile (NILE). While the jewelry segment has been rather stagnant this year, analysts believe that BIDZ is continuing to gain market share and has upside potential for their upcoming quarterly earnings.

Sohu.com (SOHU)

Sohu has been the star of the internet sector this year. The stock has posted a phenomenal 51% gain since the beginning of the year. However, it might not be too late for investors to get in on this stock. Many analysts continue to see more opportunity for their shares to appreciate due to upside potential in their upcoming quarterly earnings release.

The9 Ltd. (NCTY)

NCTY has seen their shares rise 33% this year. The popularity of the site’s “World of Warcraft” game led to a whopping 79% increase in first quarter revenues. However, the company is determined not to be totally dependent on a single game. By the end of 2009, they expect to release at least 11 new games to continue feeding their cash flow machine.

NetEase.com (NTES)

Net Ease is the third Chinese stock to appear on this list. The internet gaming company posted strong first quarter results with revenues jumping 33% y/y. That accelerating growth along with several expected game releases in the second half of the year has brought increased optimism from investors as the stock price increased 20% this year.

Digital River (DRIV)

The last in our list of winners is Digital River. The e-commerce-platform provider has seen its shares increase 21% this year. Following the theme of the other stocks on this list, DRIV posted better than expected first quarter results. A low valuation and favorable 2009 growth prospects have investors buying this stock.

Disclosure: At the time this article was published, the author only held a position in BIDZ. He has no position in any of the other stocks mentioned.

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