Morningstar neatly argues that banking industry players, by definition, have different levels of moat, which makes them attractive at reasonable prices. I agree with the thinking. Disclosure: Bank of America (BAC) and Citigroup (C) are among my biggest holdings.

You might be surprised to hear that nearly all banks have a sustainable competitive advantage--an economic moat. Warren Buffett and Charlie Munger were surprised, too. Buffett once remarked, "Charlie and I have been surprised at how much profitability banks have, given that it seems like a commodity business."

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Banks are good businesses because of their fundamental design. Although many believe that banking is a commodity business, we believe that the basic business of banking and the industry's average profitability tell investors something different. Simply put, the proof of the industry's narrow economic moat is in the numbers: The average bank over the last 15 years has generated a 13%-14% tangible return on equity, above our 10%-11% estimated cost of capital. Those are the kind of numbers that turned the heads of Buffett and Munger.

A quick review of Morningstar's bank coverage reveals 59 domestic banks and 29 international banks. Of the domestic banks, 49 have narrow moats and 10 have wide moats. Currently, we believe the best investment opportunities are in large-cap, wide-moat banks, and we encourage investors to take a closer look.