Benjamin Graham described net-net investing as buying dollar bills for fifty cents. Playmates Toys was almost exactly that.
Playmates Toys (SEHK: 0869) is a Hong Kong-listed toy company known internationally for its licensing relationships with major entertainment franchises. When TVISIL’s cheap-asset screen flagged it, the stock was trading at a meaningful discount to its net cash and investment holdings – a textbook net-net situation that Graham himself would have recognised immediately. The result: +108% total return.
What Is Playmates Toys?
Playmates Toys is a Hong Kong-listed company that develops, manufactures, and distributes toys under its own brand and under licence from major entertainment properties. The company is conservatively managed with a long history of holding substantial cash and investment balances on its balance sheet. This conservative financial culture is common among family-controlled Hong Kong companies but relatively unusual by Western standards.
What the TVISIL Screen Found
Trading below net cash and investments: When TVISIL examined Playmates Toys, the company’s cash holdings and investment portfolio – adjusted for liabilities – produced a net asset value per share that was higher than the market price. In other words, you were getting the operating toy business for free, or even at a negative implied price. This is the definition of a Benjamin Graham net-net.
Operating business was profitable: Unlike some net-nets where the discount to assets is justified by ongoing operating losses, Playmates Toys was generating profits from its toy licensing and distribution operations. The business was not burning through the cash pile – it was maintaining and in some periods adding to it.
Catalyst potential: Family-controlled Hong Kong companies at discounts to net cash have several potential paths to re-rating: special dividends, share buybacks, privatisation, or simply improved investor awareness. TVISIL does not require a specific catalyst – only that the asset discount is real and the business is not deteriorating.
The Outcome
+108% total return as the market re-rated the stock toward its net asset value and the operating business continued to generate earnings. The position is fully closed and documented in the TVISIL historical portfolio.
The Lesson
Playmates Toys illustrates that Benjamin Graham’s net-net approach – buying stocks at meaningful discounts to liquidation value – still works in modern markets when applied systematically across global stock exchanges. The opportunity exists not because markets are inefficient, but because most investors simply do not look at Hong Kong small-caps with no analyst coverage. TVISIL looks where others do not.
Subscribe at www.valueinvestingsage.com/pricing. Plans from $20 trial to $549/year Diamond.
TVISIL is an educational model portfolio. Not personalised investment advice. All investing involves risk. Past performance does not guarantee future results.