Our portfolio experienced a mix of successes and challenges this quarter. We're pleased to report on the significant recovery of our investment in UnitedHealth. After a period of decline due to unforeseen healthcare utilization and less profitable ventures, the company successfully implemented a recovery strategy, increasing rates and exiting unprofitable markets. This strategic pivot resulted in a 37% return over the past year and an 80% gain from its lowest point, contributing 2.5% to our quarterly performance. We anticipate further growth from this position.

Despite these positive developments, our overall market performance has been affected by the substantial investments in artificial intelligence data centers. While we acknowledge and embrace the transformative potential of AI—with Alphabet, a key AI beneficiary, remaining our largest holding and contributing 3% this quarter—we are cautious about the current pace and scale of infrastructure build-out. The demand for components like chips and memory, particularly in a historically volatile memory sector, appears unsustainable. This has led to inflated stock valuations for companies such as Micron, SK Hynix, and Sandisk, significantly boosting the broader semiconductor market. We believe the intense spending by AI providers, driven by first-mover advantages, is rational in the short term, but the rapid advancements in AI efficiency suggest this hardware-centric build-out phase will eventually decelerate. Therefore, we are reluctant to pursue valuations that seem disconnected from underlying fundamentals, prioritizing long-term value over short-term trends.

In response to the market's indiscriminate selling of software stocks, fueled by fears of AI disruption, we strategically added two new positions: SAP and Constellation Software. We believe these companies are well-positioned to withstand the perceived threats. SAP, the world's largest enterprise software provider, manages mission-critical systems for complex corporations. While AI will enable more efficient code generation, the inherent risks of AI-driven 'hallucinations' in critical enterprise functions, like payroll or safety protocols, mean companies are unlikely to abandon robust, proven systems. SAP's transition to the cloud and expense reductions are projected to drive revenue growth of approximately 9% and earnings growth of 15%. Similarly, Constellation Software acquires niche software companies that serve specialized markets, which often have high customer inertia and switching costs. Despite AI potentially lowering the cost of developing competing products, the significant effort and limited benefit of transitioning for these businesses make them relatively insulated. Both SAP and Constellation Software were acquired at attractive valuations, representing compelling long-term opportunities.

In a rapidly evolving technological landscape, strategic foresight and disciplined investment principles are more crucial than ever. By carefully evaluating market trends and focusing on companies with robust fundamentals and defensible competitive advantages, we aim to deliver sustainable growth, fostering a resilient portfolio that not only adapts to change but also thrives amidst it. Our commitment to value-oriented investing ensures we remain grounded in reason, seeking opportunities where others see only risk, and building a foundation for future prosperity.