Make Sure Your Internet ETF Holds This Stock

Buoyed by the likes of Google GOOG, Priceline PCLN and Facebook's FB Lazarus act, just to name a few, Internet ETFs have been stellar performers this year.

Not only has the First Trust Dow Jones Internet Index Fund FDN gained more than 30 percent this year, but almost $627 million of the ETF's $1.47 billion in assets under management have flowed into the fund since the start of 2013.

Related: Interesting Themes Among ETFs Hitting All-Time Highs.

FDN and rival funds usually make room for U.S. Internet giants, such as the aforementioned stocks and others like Amazon AMZN and LinkedIn LNKD. However, one Internet stock ETF investors should ensure their funds have is not a U.S. name. It is China's Tencent Holdings TCEHY, that country's largest Internet company.

As of Monday, shares of Tencent traded in U.S. over-the-counter markets surged 63 percent year-to-date. To put that into context, shares of the largest Internet company in the largest country in the world, though still a company many Americans do not know about, have been nearly three times better than Google than this year. Tencent has delivered more than quadruple the returns of Amazon in 2013.

When it comes to Chinese Internet names, the ones that usually pop up in Internet ETFs are Baidu BIDU, Sina SINA and Qihoo 360 Technology QIHU, among others.

Accessing Tencent via ETFs is not only possible, but the ETFs that hold shares of the company usually feature substantial weights to it. And that is a good thing. Tencent's revenue has doubled in each of the past two years and its net income will increase 25 percent, according to Bloomberg.

The Global X Social Media Index ETF SOCL, mostly known as the Facebook ETF and perhaps the first ETF to hold Twitter when that company goes public, is also home to a sizable Tencent allocation.

Tencent is SOCL's largest holding at 12.6 percent, or more than 100 basis points above the weight the ETF gives to Facebook. SOCL's weight to Tencent is nearly 300 basis points larger than the weight to LinkedIn and more than double the fund's weight to Pandora P. So when investors try to figure out why SOCL is up 44.3 percent this year, some of the credit must go to Tencent.

Tencent is also the fourth-largest holding (nearly 9.7 percent) in another Global X ETF, the Global X NASDAQ China Technology ETF QQQC. The ETF is up nearly 40 percent year-to-date.

The Guggenheim China Technology ETF CQQQ has surged almost 38.3 percent this with Tencent as its largest holding with a current weight of nearly 12 percent. There are multiple reasons why tech and Internet ETFs have been leaders among China ETFs this year and one of those reasons is clearly Tencent.

Even the new KraneShares CSI China Internet ETF KWEB gets it. KWEB, which is not yet two months old, features a 10.18 percent weight to Tencent, making the stock the new ETF's largest holding.

With a market value of $98.7 billion, Tencent is nearly twice the size of Baidu and not much smaller than Facebook.

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