With a lifetime of investing under his belt, billionaire Warren Buffett’s no stranger to stock market volatility. And while both the S&P 500 and Nasdaq 100 are up slightly year-to-date, US stocks are starting to get a bit wild.
The VIX volatility index is up almost 30% since January kicked off, and now sits close to 19. As a quick reminder, anything above 20 can be an early indicator of growing market fear. And if the index breaches 30, as it did in April 2025 following the US tariff announcements, that’s when stock prices can quickly start plummeting.
Obviously, there’s no way of knowing for certain if the US stock market’s on the verge of imploding. But even if it does, while unpleasant in the short term, it could be a phenomenal opportunity for investors to skyrocket their long-term wealth.
In fact, Buffett made some of his most successful investments during times of heighted market volatility. Here’s how.
Focus on the business, not the stock
In the short-term, investor sentiment’s what drives stock prices. But in the long run, it’s the quality and success of the underlying business that ultimately determines the trajectory of share prices. And it’s why the ‘Oracle of Omaha’ almost exclusively focuses on what the company’s doing and not what the share price is doing.
A perfect example of this in action is Buffett’s investment in Coca-Cola (NYSE:KO). Following the Black Monday stock market crash in October 1987, Coca-Cola shares went into free fall, tumbling more than 20% in a single day and continuing to drop thereafter.
But while everyone else was panic selling, Buffett took a look under the hood. He discovered a business with a globally-reaching brand with ample pricing power, generating predictable recession-resistant cash flows, that now traded firmly below its intrinsic value.
In early 1988, he went on to invest roughly $1.3bn at a discounted price. Since then, he’s never sold a single share, and his position’s now worth almost $28bn. And that’s not including the extra $11.7bn Buffett’s earned through dividends along the way.
Is Coca-Cola still a buy in 2026?
Buffett’s core investment thesis continues to be valid even today. The company retains its global dominant status within the soft drinks market. And it’s been steadily branching out into new sales channels through strategic bolt-on acquisitions.
However, like all investments, there are still risks. With consumer health consciousness steadily rising, its flagship full-calorie Coca-Cola soft drink’s seeing a slow and steady volume decline in key markets like the US. And that’s only being compounded by more governments introducing higher sugar taxes.
Coke Zero has been effective at protecting market share. But with soft drink volumes generally contracting among younger generations, the firm’s cash flows may be under long-term pressure.
At a $300bn market-cap, it’s unlikely this beverage business will deliver the same explosive returns that Buffett’s enjoyed. But if the company continues to generate steadily expanding cash flows then, at a discounted valuation, it could be an attractive opportunity for income investors to look at.
After all, if the share price drops, the yield goes up. And with over 60 consecutive years of dividend hikes, a stock market crash could be a golden opportunity to consider locking in some tasty passive income.
