I seem constantly baffled by the layout of my 'Favorites' file. I have dozens of favorites in random order plus folders where I put important ones. It all seems very haphazard and trying to cut and paste favorites into the proper folder is very tedious. However when I look at the 'favorites' folder by accessing it via the 'C' drive all the sundry favorites are arranged in alphabetic order. I find I can highlight all the ones I want and then drag them into the appropriate folder. So why doesn't IE arrange them alphabetically ? And why, having sequenced them for drive 'C' access, isn't the sequence the same when looking at them via IE ? I've even copied the favorites file and copied it back to see if IE would maintain the sequence, but no it shuffles them again. There are some things greater than any of us about which we are not supposed to know .....
IE Favorites is as well thought out as any other MS program feature - you just need to find out what to do, which is what the advice above is about.
By the way, if you find a website you like, open the Favourites left hand box, click on Add and then choose which folder you want to place it from the panel. You can also create a new folder for such a particular purpose.
Incidentally the Sort by Name feature works on most MS programs as well as Start>Programs to organise Programs in alphabetical order.