It's early into 2011, but we're already seeing a group of companies breaking out and stomping the general market. I've compiled a list of the top five performers in the Internet software and service sector. Seeing which companies are rallying ahead of the pack might either show excellent execution from the businesses themselves, or a larger trend that could propel into sub industries forward.

In both cases, this can be extremely valuable. In the case of businesses executing, leaders in expanding fields can be discovered. In the case of larger trends, you can use the information to search out other stocks which are following the same trend, and might not have seen the same price appreciation. Call it buying into inevitable trends on the cheap.

Without further ado, here are the top five Internet software and services performers so far in 2011:

Company

Market Capitalization (Millions)

YTD Return

Sify Technologies (Nasdaq: SIFY)

                       1,016.6

                        152.2%
Rediff.com (Nasdaq: REDF)

                        283.4

                         97%
Velti (Nasdaq: VELT)

                        559.9

                         86.5%
Travelzoo (Nasdaq: TZOO)

                       1,160.2

                         70.3%
Sina (Nasdaq: SINA)

                       7,096.9

                         68.6%

Source: Capital IQ, a division of Standard & Poor's. Screen is for companies with market capitalization in excess of $200 million. Returns are from Dec. 31, 2010 to May 27, 2011 and are adjusted for dividends.

India on the marchWhile investors might be used to seeing Chinese companies at the top of high-growth lists, two Indian firms have broken out from the pack so far in 2011. Both Rediff and Sify Technologies are based out of India and have become the center of growth investors' attention on the subcontinent. Sify provides hosting, connectivity and other IT-services, while Rediff.com run an Indian web portal. At the start of the year, fellow Fool Rick Munarriz recommended investors shy away from Rediff and instead take a look at Sify. Hwever, with both stocks seeing year-to-date gains that had exceeded 200% through the end of April, investors of both companies had found plenty of reasons to cheer.

In spite of a recent pullback, both companies are still trading at the upper range of Internet stocks this year. The troubling problem for investors interested in the companies is that they either soar or plunge on limited amounts of news. While India undoubtedly has a bright future ahead, in Rediff's case, you're paying 13 times sales for a company with a patchy history of revenue growth that still only managed 16% annual revenue growth in the last 12 months.

The mobile play
After previously trading in London, Velti pursued a stateside IPO earlier this year and saw shares quickly blow past their $12 offering price. The mobile marketing and advertising agency appears to be in a profitable niche, mobile, and revenues are growing soundly. However, operating income, after checking in at $14 million in 2009 saw a plunge to $7.8 million in 2010. Companies in fast-growing industries will often pursue sales growth before investing in earnings, but the numbers show the caution investors must apply in sorting through growth stocks. While mobile continues to grow, it's also incredibly fast moving and the demands of mobile platforms might still rapidly evolve in coming years. While that's an opportunity for companies with good forward vision, it's also a threat to Velti's future growth prospects.

Two Internet trends in focus
Finally, we check in with both Sina and Travelzoo. Both are riding a wave of enthusiasm surrounding new web business models. In Travelzoo's case, the company recently started a Groupon-like service called Local Deals that leverages the company's massive email list of nearly 20 million subscribers to send targeted local offers.

In Sina's case, the popularity surrounding the company's Weibo social networking site, which combines aspects of both Twitter and Facebook, is helping propel shares forward. Sina might look expensive at 57 times forward earnings, but social media is also vastly different across markets. In China, government regulation and local tastes could help micro-blogging sites dominate the social landscape of the country. Just because Renren (NYSE: RENN) is the closest comparison to Facebook doesn't mean that it'll end up winning China's social media battle.

Keep updated with a watchlist
While none of the previous companies are formal recommendations, staying ahead of companies executing and in favorable industries can help you uncover more winners for the coming years. To stay updated on any of the companies mentioned in this article, make sure to add them to our new free My Watchlist feature today. You'll get up-to-date information on all the companies, and you can also follow larger industries like Internet software and services: