..Well, it is not my FAVORITE Horror-Sequel but "The Human Centipede II (Full Sequence)" is somewhat better than the first (even though I kinda miss Dr. Heiter).
HC aside, a few of my favorite Horror-Sequels are "Final Destination V", "Saw II" and "The Grudge III". :P
My most favorite sequel to a horror movie is probably Scream 2. It is generally known that the second movie was indeed better then the first and was praised by many critics. It is also a great series to me and that's why my 2nd favorite sequel is Scream 4. It is something old in a new decade. It is still scary as hell, but more gory then the previous ones. It had a terrific plot and it was something enjoyable to watch.
My third - and last - favorite sequel is probably I Still Know What You Did Last Summer. I love that series although the third one wasn't that good. I want a fourth film with the original cast/survivors of the first two. And Julie should survive everything. ISKWYDLS was as scary as the first one, although the first one was better. It had Sarah Michelle Gellar and she's a wonderful actress.
It's kinda hard for me to pick one. I've been a horror fan for a long time. I guess my top three would have to be "A Nightmare on Elm Street," "Final Destination," and "Hellraiser." I've got lots more but not enough time to list them all.