Why Warren Buffett is betting big on IBM (and not Google, Microsoft or HP)

Warren Buffett didn't become a billionaire and arguably the world's most successful investor by betting on technology stocks. That's because he's always avoided tech investments, finding the long-term business models anywhere from speculative to dubious.

Until this year. In an interview Monday on CNBC, Buffett revealed that his investment firm, Berkshire Hathaway Inc., has purchased $10.7 billion in shares of IBM (NYSE: IBM) since March, giving the company a 5.4% stake in Big Blue. According to the Wall Street Journal, Berkshire's stake in IBM makes it the "second-biggest shareholder at Sept. 30, after investment firm State Street Global Advisors."

Buffett has made this massive and gradual investment despite IBM shares continually hitting record highs throughout the year. (IBM was trading late Tuesday morning at 186.07, just off the 190.53 all-time high set on Oct. 14.) Clearly Buffett has chosen to ignore warnings that IBM shares won't be able to sustain their altitude.

He also bought up the 64 million shares likely knowing that IBM reportedly was on the verge of a change in the corner office. As early as last June, CEO Sam Palmisano was rumored to be looking for a successor (whom he eventually found). That's a lot of potential uncertainty.

So what made the legendary billionaire investor lay down a huge bet on Big Blue? It all started when he read IBM's annual report this year -- something Buffett says he has done every year for the past 50 years. This time, though, he had an epiphany. From the CNBC Squawk Box transcript:

"I don't think there's any company that's—that I can think of, big company, that's done a better job of laying out where they're going to go and then having gone there. They have laid out a road map and I should have paid more attention to it five years ago where they were going to go in five years ending in 2010. Now they've laid out another road map for 2015. They've done an incredible job. First, Lou Gerstner, when he came in, he saved the company from bankruptcy. I read his book a second time, actually, after I read the annual report. You know, "Who Said Elephants Can't Dance?" I read it when it first came out and then I went back and reread it. And then we went around to all of our companies to see how their IT departments functioned and why they made the decisions they made.