Make A Teaching Moment
I think the top answers give really good advice that should generally be followed. This idea is a bit out of the box, and makes a few presumptions. First, it assumes that you can afford to buy your kids whatever toys get stolen. Second, that you can afford to buy your kid a cheap video camera, whether built into a low-end smart phone or a standalone device.
Some bullies are themselves victims who are simply acting out their frustrations because they, too are powerless in other contexts. Other bullies simply see that they can get their way by force, and only learn their lessons much later in life when the rest of society pushes back and they end up in jail or on the losing end of a lawsuit or out of work because nobody wants to hire them. And, of course, some bullies are clever sociopaths who become CEOs of Fortune 500 companies. You don't know which kind of bully your son is dealing with, but on some level, it doesn't matter.
First, teach your son that he is lucky to have toys. There are lots of children in the world, and even in his country/state/province/city/neighborhood who can't afford toys, or only third-hand toys. He should be grateful for the things he does have which are much more valuable, like a supportive family, a safe home, opportunities, etc. The toys are less important, and learning to let go of them now is good exercise for the future, when other forces beyond his control take them away.
Second, buy your son two toys: one to replace the one he lost, and one (or more) to give away. Third, give him a camera that he can use to document interactions with other kids. A cell phone with GPS tracking is obviously best, because you can prove that it's yours and usually locate it with a tracking app if it gets stolen. I'm counting on 5 year old bullies not be clever enough to swap out SIM cards at school. If your bully can do that, you should switch schools. ;)
Tell your son that you want him to give the second toy to the bully, and that you want him to do it in the most public place that he can, like during lunch, when all the other kids (and teachers) can see. When he does, he should say something like: "Ted, I know you really like this toy, because you took mine the other day. That made me sad, but then I realized that maybe your parents didn't get you any toys. So my dad got me a new one, and one for you too. Here you go. Maybe we can play together later! Oh, and if you like this one too, you can have it."
Of course, any adults watching will recognize this as a pure power move with no good counter. The kid will either recognize that he has been labeled in a particular way and reject the label (possibly in a way that requires teacher intervention), or he will accept the gesture as genuine, and give your kid a chance at reconciliation. Naturally, your son should be as genuine as possible. If he can befriend and co-opt the bully, he will learn a valuable lesson that will be useful for the rest of his life. And if the bully acts out in front of everyone else, he will have a camera and hopefully the attention of adults in the room to defend him.
If you suspect that the staff at your son's school are not fully engaged, then you should tell your son to position himself in a way such that one or more of them are in the frame as he records the event.