Jim Cramer's Safest Stock For a Huge Market Selloff in July

The Market Soars, but Clouds Remain

The S&P 500 surged to a record high in June, fueled by a wave of positive global developments. 

A U.S.-China trade deal, announced after talks in Geneva and London, paused crippling tariffs, boosting market sentiment. U.S. and Israeli strikes severely damaged Iran’s nuclear enrichment capabilities, followed by a fragile U.S.-brokered ceasefire between Israel and Iran, calming oil markets and driving equity gains. 

Additionally, a truce in the 30-year Rwanda-Congo conflict opened their mineral wealth to U.S. markets, promising supply chain benefits. President Trump’s recent Supreme Court victories further bolstered investor confidence. 

However, Trump’s abrupt exit from trade talks with Canada over its digital taxes on U.S. tech giants like Meta Platforms (NASDAQ:META) and Google threatens a tit-for-tat trade war, potentially raising prices for lumber and other goods. While the risk of a July market crash remains low, it’s never zero. 

Amid this, Jim Cramer, known for bold stock picks, called Robinhood (NASDAQ:HOOD) the “safest” trading platform stock. But is Robinhood a true safe haven if markets falter in July?

Robinhood: Growth, Expansion Plans, and Crash Resilience

Robinhood Markets has emerged as a standout in the brokerage sector, with its stock surging 192% in 2024 and another 122% so far this year. Jim Cramer, on MSNBC’s Mad Money show, dubbed it the “safest” of its kind, citing its user-friendly platform and appeal to younger investors. 

HOOD’s growth stems from its commission-free trading model, which attracted 14.4 million active users, up 5% year-over-year, but down slightly from the 14.9 million in Q4. Revenue grew 50% to $927 million, driven by crypto trading (27% of revenue) and margin lending. Its $9 billion cash reserve supports financial stability, despite a high forward P/E of 55, reflecting growth expectations.

Robinhood’s expansion plans are ambitious, too. Last year, it launched a Robinhood Gold credit card, and the premium subscription service reached a record 3.2 million members. Segment revenue increased 54% to $54 million. It has also started:

• Robinhood Strategies, a new service that offers ETFs across various expert-managed strategies
• Robinhood Banking, which offers high-yield savings accounts, professional tax advice, and more, pushing the brokerage into new areas like estate planning.
• Robinhood Cortex, a new AI investment tool that includes features like Stock Digest and Trade Builder.

The acquisition of TradePMR in 2024 expanded its custodial services for RIAs, targeting wealth management. International expansion into the U.K. and EU, with crypto wallets and margin trading, aims to capture 10 million new users by 2027. Partnerships with Meta for in-app trading features further diversify revenue, reducing reliance on payment-for-order-flow (PFOF), which faces regulatory scrutiny.

Is It “Safe?”

However, as a “safe” stock for a potential July crash, Robinhood has vulnerabilities. Its user base, heavily retail and crypto-focused, is sensitive to market volatility. A crash could trigger margin calls, as seen in 2021’s meme stock fallout, when HOOD restricted trading, damaging trust. 

While it ought to be largely immune from any trade war fallout, a digital tax from Canada could pose a risk. Still, its billion-dollar cash buffer and 1.5x debt-to-equity ratio provide some resilience, a market downturn could slash trading volumes, cutting revenue.

Investors may not be well-served buying HOOD as a crash hedge. Its growth trajectory suits long-term investors, but its volatility and retail-driven model make it less safe than Cramer suggests. 

Defensive stocks like utilities or consumer staples, with lower betas, offer better protection. Still, HOOD’s expansion and user growth make it a compelling growth play for risk-tolerant investors outside crash scenarios.

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